annual report 2017 - group.skanska.com · d skanska annual report 2017 skanska is one of the...
TRANSCRIPT
Annual Report 2017
We build for a better society.
Skanska Annual Report 2017 C
Contents
Group overview2017 in brief 1
Comments by the President and CEO 2
Skanska’s values 6
Business model 7
Business plan 2016 –2020 8
– Financial targets 2016 –2020 9
– Great People 12
– Market Making 13
– Operational Excellence 14
Risk and opportunity management 16
– Main risks 18
Focus areas within sustainability 20
Share data 24
Market overview 26
Business streamsBusiness streams 30
Construction 32
Residential Development 36
Commercial Property Development 40
Infrastructure Development 44
Financial information Corporate Governance report 49
Group Leadership Team 56
Board of Directors 58
Report of the Directors 61
– Sustainability report 70
Consolidated income statement 87
Consolidated statement of comprehensive income 88
Consolidated statement of financial position 89
Consolidated statement of changes in equity 91
Consolidated cash flow statement 92
Parent Company income statement 94
Parent Company balance sheet 95
Parent Company statement of changes in equity 96
Parent Company cash flow statement 97
Notes, table of contents 98
Auditor’s Report 183
Independent practitioner’s review report on Skanska AB’s greenhouse reporting 187
Major orders, investments and divestments 190
Consolidated quarterly results 194
Annual General Meeting 196
Investors 196
Addresses 197
This document is in all respects a translation of the Swedish original Annual Report. In the event of any differences between this translation and the Swedish original, the latter shall prevail.
Reporting of revenue and earnings in the first part of the Annual Report (pages 1–48) complies with the segment reporting method. The statements of financial position and cash flow are presented in compliance with IFRS in all parts of the Annual Report.
Skanska AB, Swedish corporate identity number 556000-4615.
121 Seaport Boulevard, Boston, USA
Commercial Property Development and Construction
It’s a building impossible to miss. In a boxy city, 121 Seaport
stands out as a 17-story ellipse.
This bold, curved look was key to attracting the companies
now secured as office tenants. It also enabled a highly efficient
and flexible design, benefiting both customers and Skanska.
During design, data analysis showed that an elliptical building
has less direct sun exposure, producing 15 percent energy
savings compared to a similarly sized rectangular building.
Also, the elliptical design required 10 percent less cladding,
and utilized a lighter structure because of decreased wind
loads. These reduced material needs led to lower costs and
less carbon emissions.
Skanska speculatively began this building, which is targeting
the top LEED Platinum green building rating. The combination
of Skanska Commercial Property Development USA, Skanska
USA Building and Skanska USA Civil led to innovative solutions
for a rapid delivery. In 2017, all 37,000 sq m of office space was
leased.
Skanska has led the transformation of this neighborhood.
Along with 121 Seaport, Skanska developed 101 Seaport,
an office property divested in 2016 for about SEK 3.8 billion,
and Watermark Seaport, a residential property that Skanska
and an equity partner divested in 2017; the Group’s portion
of that divestment was about SEK 510 M. A public park will be
Skanska’s final addition to that row of buildings.
A bold addition to Boston
Top photo: the 121 Seaport and 101 Seaport office developments.
From left in bottom photo: the 121 Seaport and 101 Seaport office
developments, and the Watermark Seaport residential development.
Skanska Annual Report 2017B
Synergies from Skanska’s business streams
ConstructionBuilds civil and building projects
Residential DevelopmentInitiates, develops and sells homes to private individuals
Commercial Property DevelopmentInitiates, develops and divests properties
Infrastructure DevelopmentProduces solutions for essential infrastructure in the form of public-private partnerships (PPP)
Shared common values and people’s expertise in all areas on a Group-wide scale.
Collaboration reduces risks, maximizes opportunities and improves project delivery,
providing benefits to customers.
Close cooperation in procurement and production increases efficiencies.
Internally generated construction contracts.
Operations in different geographies reduces risks and creates a stable platform for
increased operating income over time.
Ability to take on large, complex projects.
Ability to offer customers a wide range
of services and products.
Innovative solutions to challenges.
Skanska’sbusiness streams
Operationalsynergies
Leads to Skanska being more competitive through
Maximized opportunities in the marketplace.
Improved cost control.
Strong financial position.
Enhanced returns from multiple sources.
Project Development
Operational and financial synergies are among the benefits achieved through collaboration between business streams and Business Units in Skanska.
SEK 30.8 bnof Skanska’s total order backlog
were contracts involving more
than one Business Unit.
SEK 23.2 bnin Construction revenue were
from internal Project Develop-
ment contracts in 2017.
In New York City, significant
progress is being made rede-
veloping LaGuardia Airport’s
Central Terminal B, the biggest US
public-private partnership (PPP).
In 2018, travelers will begin using
the project’s first new facilities:
the initial terminal section and
a 3,200-space parking garage.
Skanska Infra structure Develop-
ment is part of LaGuardia Gateway
Partners, which is responsible
for financing, design, construc-
tion, operations and maintenance.
The Group’s 70 percent share of
the design-build contract is about
SEK 23 billion, equally divided
between Skanska USA Building
and Skanska USA Civil.
Skanska Annual Report 2017D
Skanska is one of the world’s leading construction and project
develop ment companies, focused on select home markets in the
Nordic region, Europe and USA.
Supported by global trends in urbanization and demographics,
and by being at the forefront of sustainability, Skanska offers com-
petitive solutions for both simple and the most complex assign-
ments. Driven by the Group’s values, Skanska helps create sustain-
able futures for customers and communities.
In 2017, the Group’s 40,000 employees delivered good results
while building for a better society.
Dividend history
Strong global trendsDemographic changes and con-
tinued urbanization lead to
increased demand for infrastructure,
hospitals, schools, homes, offices
and more. Demand for Skanska’s
expertise in green construction is
significant in a world that is becom-
ing increasingly aware of the human
impact on the planet.
Leading market positionSkanska holds a leading market posi-
tion in each of its home markets. By
leveraging the operational synergies
across the business streams and
home markets, its competitive
advantage is strengthened.
DiversificationSkanska’s risk diversification across
four business streams with operations
in several geographic markets and
segments helps ensure a balanced
and diversified risk profile.
Strong cash flowThrough an attractive business
model, Skanska generates strong
cash flow which puts the Group in a
stable financial position.
Financial synergiesThe strong cash flow from Construc-
tion is invested in the Group’s own
high-return development projects.
The investments in Project Develop-
ment will continue to increase.
Attractive total shareholder returnSkanska has a competitive total share-
holder return with more than fifteen
years of increased or maintained
ordinary dividend, while maintaining
a continued high level of investments
in Project Development.
Skanska as an investment
SEK %
0
2
4
6
8
10
12
14
2017 12016201520142013201220112010200920080
2
4
6
8
10
Dividend, SEK Extra dividend, SEK Dividend yield, % 2
1 Based on the dividend proposed by the Board of Directors.
2 Dividend per share divided by the closing share price for each respective year.
Earnings for the period per share and return on equity
SEK %
Earnings for the period per share, SEK Return on equity, %
0
5
10
15
20
25
20172016201520142013201220112010200920080
5
10
15
20
25
30
35
40
45
Skanska Annual Report 2017 1
2017 in brief161 38,95,5• Norden, 42
• Europa, 22
• USA, 36
• Byggverksamhet, 18
• Bostadsutveckling, 26
• Kommersiell fastighets- utveckling, 42
• Infrastruktur- utveckling, 14
• Bostadsutveckling, 32
• Kommersiell fastighets- utveckling, 63
• Infrastruktur- utveckling 5
161 38.95.5
• Nordics, 42
• Europe, 22
• USA, 36
• Construction, 18
• Residential Development, 26
• Commercial Property Development, 42
• Infrastructure Development, 14
• Residential Development, 32
• Commercial Property Development, 63
• Infrastructure Development, 5
Capital employed, SEK 38.9 bn
in Project Development, by business stream, %
Operating income, SEK 5.5 bn1
by business stream, % 2
Revenue, SEK 161 bn
by geography, % 2
Skanska’s home marketsSkanska has operations in eleven countries in Construction, Residential Development, Commercial Property Development and Infrastructure Development. The Business Units in these business streams work together in various ways to create both operational and financial synergies, leading to increased value creation.
USA
Sweden
Finland
Norway
United Kingdom
Denmark
Poland
Czech RepublicSlovakia
HungaryRomania
• The number of homes sold and started totaled 4,285 and 4,318, respectively.
• BoKlok, the affordable homes business, continued to deliver great returns and represented almost half the homes Skanska sold in Sweden.
Commercial Property Development
• A new alltime high in divestment gains of SEK 3.5 billion from divesting 27 projects.
• The number of ongoing property projects was 46 at the end of the year, corresponding to an investment value upon completion of SEK 27.6 billion.
• 24 projects started across all geographies: in the Nordics, Europe and USA.
Infrastructure Development
• Operating income totaled SEK 925 M.
• The investment in the A1 motorway project in Poland was divested for about SEK 1.4 billion.
• Net present value of the portfolio was SEK 3.0 billion.
• Focusing on the US market.
1 Operating income in 2017 was negatively affected by impairment charges of SEK 1.0 billion and project writedowns of SEK 1.5 billion. 2 Before Central and eliminations.
Construction
• Order bookings amounted to SEK 151.8 billion. The major contracts included: – Farley Post Office in New York, USA – George Washington Bridge in New York, USA
• Order backlog amounted to SEK 188.4 billion, corresponding to 15 months of production.
•The operating margin in the stream was 0.8 percent: – Strong performance in the Nordics and USA Building – Weak performance in Poland, the UK and in USA Civil.
• Operating income was negatively affected by impairment charges of SEK 1.0 billion and project writedowns of SEK 1.5 billion.
• Actions to restore profitability have been initiated and consist of restructuring of the Polish operations, exiting the power sector in USA, focusing on core business in the UK and continuing to adapt to tougher market conditions in the Czech Republic.
Residential Development
• Continued improved performance with an alltime high in operating income, SEK 1,716 M, and clearly met return targets.
Skanska Annual Report 20172 Comments by the President and CEO
Guiding Skanska until 2020 is our Profit with Purpose Business
Plan, which has two core elements: delivering an industry-leading
total shareholder return, while building for a better society through
the important projects we undertake and our innovative, sustain-
able solutions. These ambitions arise from what we have long done.
We are determined to resume providing an industry-leading
return, while increasing our positive contributions to society.
Profit with Purpose is based on Skanska’s strengths. We are
strong through our business model, which has consistently pro-
vided significant financial returns. We are strong from how our
13 Business Units in eleven countries increasingly collaborate and
share expertise to provide customers with the best solutions. And
we are strong through our values, which more and more customers
appreciate. These strengths form our foundation. They position us
to create long-term value for Skanska and our shareholders.
Our performance in 2017 consisted of solid accomplishments,
but also significant challenges that we are urgently addressing.
Overall, Group operating income for the year was lower at
SEK 5.5 billion. Our financial position remains strong, so the
Board of Directors proposes to maintain the dividend at
SEK 8.25 per share.
Residential Development’s top performanceOur Residential Development stream’s performance was even
stronger than in 2016, with returns significantly above our targets
and operating income reaching an all-time-high of SEK 1.7 billion.
We started 4,318 homes, and sold 4,285 homes. This stream’s geo-
graphic breadth provides resiliency to market shifts and local fluc-
tuations in demand. Also, we mainly operate in the affordable and
core segments, where demand tends to be durable.
New Commercial Development recordsCommercial Property Development set a new record in 2017 with
divestment gains of more than SEK 3.5 billion from divesting
27 projects. At the same time, we continue to increase investments
in new commercial developments - starting 24 projects in 2017 -
and secure major leases, with leasing also achieving record high
levels last year. These actions improve our ability to create value
to be realized in future years.
Significant Infrastructure Development gainsWe made significant gains in Infrastructure Development from
divesting three public-private partnership (PPP) projects, most
notably the A1 highway in Poland. We are selectively pursuing new
projects as well as bringing existing projects into a fully operational
state, increasing their value.
Improving profitability in ConstructionIn Construction, our Nordic units and Skanska USA Building
continued to achieve top results, but it was not enough to offset
weaknesses in several other units. Consequently, we did not reach
our target Construction margin of 3.5 percent – a result that is not
acceptable.
To improve profitability across the Group, we are downsizing
operations with continuously low profitability or that are no longer
strategically important. In the Construction stream, this involves
restructuring Polish operations, exiting the power sector in USA,
increasing focus on the core business in the UK, and continuing to
adapt to tougher market conditions in the Czech Republic. Further-
more, with a thin pipeline of PPPs in Europe, we are focusing Infra-
structure Development operations on the US market.
Overall, we are increasing our focus on cost control and risk man-
agement. During 2018, we will implement a new Group management
structure, including a new Group Leadership Team (GLT). This
model is intended to increase organizational effectiveness – includ-
ing bringing leadership closer to operations – and reduce costs.
Growing Project DevelopmentBoosting profitability also includes increasing investments in Com-
mercial Property Development and Residential Development. This
is key to securing Skanska’s strong financial performance into the
future. Investments include acquiring additional land and build-
ing rights, and bolstering our capabilities. In 2017, Commercial
Property Development delivered 42 percent of Skanska’s operating
income, and Residential Development 26 percent.
Synergies through collaborationsWe continue to drive One Skanska collaborations between and
within Business Units, resulting in operational and financial
synergies. These synergies enable Skanska to self-finance Project
Development activities, while raising efficiencies, lowering risks
and strengthening customer offerings. Ultimately, both Profit and
Purpose are advanced. Deepening these synergies is a key priority.
Comments by the President and CEOSkanska’s financial position remains strong, powered by continued high performances from Project Development. We are taking actions to improve Construction profitability, while our values and sustainability expertise provide competitive advantages. In 2018, we will advance further with our Profit with Purpose Business Plan.
Skanska Annual Report 2017 3Comments by the President and CEO
Values attract employees and customersEverything we do at Skanska is grounded in our four values: Care for Life, Act Ethically and Transparently, Be Better Together and Commit to Customers. Through our people living the Skanska val-ues in their daily work, we become more attractive as an employer, as people want to work for companies that stand up for larger beliefs. And we become more appealing to customers, as they can trust us.
Creating a sustainable futureSkanska’s values are essential to creating a sustainable future for our people, customers and communities. Our sustainability agenda consists of five focus areas linked to our values and to our core activities in Construction and Project Development: Safety, Ethics, Green, Community Investment and Diversity and Inclusion.
In 2017, we continued to make important progress with sustain-ability, including launching a business-focused Green strategy and driving vital conversations about diversity and inclusion. Core to the Green strategy is significantly reducing carbon emissions by 2030 to align with the Paris international climate agreement. Beyond environmental benefits, lowering carbon emissions will help us both lift our operational efficiencies and deliver solutions that help customers meet their own carbon and energy objectives.
Even with those forward steps, the three work-related fatalities on Skanska sites in 2017 make us deeply aware of the importance of continuous focus.
Supporting global prioritiesOur sustainability expertise is a key differentiator in our markets, and an important part of how we contribute to society.
For 17 years, Skanska has actively supported the universal sustainability principles defined by the United Nations Global Compact. More recently, the UN’s member countries adopted 17 Sustainable Development Goals to transform the world by 2030.
In 2017, Skanska began using these goals to measure the per-formance and contributions of the Group’s sustainability work. The UN goal of sustainable cities and communities – making cities inclusive, safe, resilient and sustainable – is most relevant to Skanska, providing us with the greatest opportunities to effect positive change.
Ongoing good market conditionsFor 2018, we see continued robustness in the world economy, and stable to strong conditions across all home markets. Plentiful opportunities enable Skanska to focus on pursuing projects right for us, while our strong balance sheet allows us to capitalize on development possibilities. At the same time, Skanska will continue to monitor ongoing political uncertainties in our home markets.
Sweden’s favorable environmentIn Sweden, we anticipate strong market conditions continuing for construction and commercial properties. The Swedish residen-tial market, our largest housing market, has returned to a sounder and more stable condition.
Almost half the homes we sell in Sweden are through the BoKlok affordable residential business. We are investing about SEK 250 M to increase production capacity nearly 50 percent at BoKlok’s main plant. That will grow an important part of Skanska, while enabling us to provide even more people with the opportunity of homeown-ership.
Benefiting customers and shareholdersI am fortunate to lead a company with deeply embedded values that is guided by Profit and Purpose – for these I thank my predecessor, Johan Karlström.
Together with our great people, my new Group Leadership Team (GLT) and I are committed to improving Construction profitabil-ity. We are also dedicated to leveraging Skanska’s extensive Con-struction and Project Development expertise and strong balance sheet to provide customers with the most compelling solutions. I am confident our actions will benefit shareholders too.
I look forward to earning the trust of Skanska’s shareholders, customers and communities in the years ahead.
Stockholm, February 2018
Anders DanielssonPresident and CEO
“ Increasing investments in Project Development will help secure Skanska’s strong financial performance into the future.”
Skanska Annual Report 20174
Engineering future scientific breakthroughs
Skanska Annual Report 2017 5
European Spallation Source (ESS), Lund, Sweden
Construction
Amid the low landscape of southern Sweden, the most
powerful research facility of its type is being created.
Comparable to a giant microscope, ESS will use neu-
trons to enable scientific breakthroughs with materials,
energy, health and the environment. Also, the facility’s
unique capabilities will help scientists tackle some of
the most complex challenges confronting science and
medicine.
Delivering this pioneering facility requires a true
partnership. That’s because well into construction,
specifications are still being developed for major pieces
of scientific equipment. An agreement based on mu-
tual transparency and trust between the customer and
Skanska – leveraging expertise from Sweden and the
UK – accommodates such evolving requirements. It is in-
tended to set a new industry standard for collaboration.
Another ESS aspiration is to be the world’s most
sustainable research facility. A key Skanska contribution
is eliminating waste to landfill, requiring new ways of
working with materials and suppliers.
Skanska Annual Report 20176 Skanska’s values
Skanska’s valuesFundamental to Skanska’s success are four values, which keep the Group moving in the right direction in a fast-changing world. Skanska constantly drives the need for every employee to strongly live these values in all they do. Skanska selects customers and partners that share the Group’s values.
Care for LifeThrough Care for Life, Skanska supports health and well-being. Aiding in advancing
this priority is the Well Building Standard, an external certification of building features
that affect health and well-being. In 2017, Skanska committed to pursuing Well cer-
tification for all office development projects in Poland, Czech Republic, Romania and
Hungary. This early commitment will help drive the market for healthy buildings in
Central and Eastern Europe, and advance Group-wide sustainability efforts. Research
shows that green and healthy work environments lead to improved occupant well-
being and productivity.
Act Ethically and TransparentlyLiving Skanska’s value of doing business with a high degree of integrity and transpar-
ency depends on the Group’s employees, and those working on the Group’s behalf.
In 2017, Skanska increased due diligence efforts on the broad network of consultants,
partners, suppliers and subcontractors essential to delivering projects. This increased
scrutiny – done through a risk-based approach – will continue to intensify, further
ensuring adherence with Skanska’s Supplier Code of Conduct. The Supplier Code,
which describes behaviors expected of suppliers, is incorporated into every supplier
agreement.
Be Better – TogetherThe Group wants to move forward together with customers, partners and communi-
ties. In the UK, a Skanska consortium is pioneering new ways of analyzing and visual-
izing data to help local governments more proactively manage infrastructure, such as
highways. This starts with public customers sharing large databases – including about
emergency vehicle routes and flood zones – with companies such as Skanska during
the tender process. The Group rapidly analyzes this information to identify trends
of value to the customer, and these are used to create optimized offerings. Data
analytics are increasingly forming a central role in how Skanska plans projects.
Commit to CustomersSkanska helps customers be successful, and aims to build partnerships that endure.
Since 1962, the Group has partnered with Boeing to build and upgrade facilities, and
has established a track record of successfully delivering critical projects while not
impacting production. Often, Skanska is engaged early to offer cost and schedule
insights. Safety has been another area of collaboration, with Skanska supporting
Boeing safety goals. Skanska has been recognized as a Boeing Supplier of the Year,
and now actively supports Boeing in three US states.
Act Ethically& Transparently
Be Better –Together
Care for Life
Commit toCustomers
Skanska Annual Report 2017 7Business model
Dividend
Revenue from external customers
Investment opportunities
Internal contracts
Return on equity
Operating margin
Construction Project Development
◀Revenue with associated contract profits
Development gains are generated and are realized upon divestment
◀◀◀
Return on capital employed
◀◀
◀◀
The free working capital in Construction combined with the profits generated by the Group enable the financing of investments in Project Development
are generated by investments in Project Development
External financing◀
Business modelProjects are the core of Skanska’s operations. Value is generated through the thousands of projects the Group executes each year. The goal is for every project to be profitable while being executed in line with Skanska’s ambition to be an industry leader in sustainability. Internal collaborations produce operational and financial synergies that create further value.
The Business Units within the four business
streams collaborate in various ways, creating
operational and financial synergies that
generate increased value. Going forward,
even more will be invested in releasing these
synergies.
Operational synergies Operational synergies are primarily gener-
ated by using the local, specialized expertise
found in the various Business Units on a
Group-wide scale. Units from different busi-
ness streams often collaborate on projects,
which reinforces their customer focus and
creates the necessary conditions for sharing
best practices, while ensuring efficient utili-
zation of the Group’s collective expertise and
financial resources. Units in the same busi-
ness stream also collaborate to make better
use of expertise or size. Business Units estab-
lish geographical clusters to share resources
and expertise, with shared activities in
procurement and production also boosting
efficiency.
Financial synergies Skanska’s Construction business stream
does not tie up capital but instead operates
with free working capital. The free working
capital combined with the profits generated
by the Group, as well as its ability to lever-
age up its balance sheet to borrow money,
enables the financing of investments in
Project Development, which generate an
excellent return on invested capital. These
investments also create new contracts for the
Construction stream that generate a profit.
This is illustrated in the image below.
Size provides competitive advantagesBy being a market leader, Skanska is well
positioned to meet the highest expectations
of customers.
The Group’s size and financial strength
give Skanska an advantage in the most
complex assignments, where collective
experience and know-how are used to meet
customer needs.
The Group’s operations are based on
local Business Units with good knowledge
of their respective markets, customers and
suppliers. Local units are backed by Skan-
ska’s brand and financial strength, as well
as Group-wide expertise and values. Con-
sequently, Skanska is both a local company
with global strength and an international
construction and project development
business with a strong local presence.
Skanska’s business model
Skanska Annual Report 20178 Business plan 2016–2020
Business plan 2016–2020 Profit with PurposeGuided by this business plan, Skanska is striving to increase shareholder value while building for a better society. Advancing with these interlinked priorities is how Skanska creates Profit with Purpose. Key actions for 2018 include boosting Construction performance while continuing to create value through Project Development.
The five-year Profit with Purpose Business Plan is based on the strategy that Profit and Purpose are interlinked, with each strengthening the other. Profit is needed to deliver Skanska’s purpose of building for a better society, and advancing with that purpose contributes to Skanska’s profit. Skanska has high ambitions for both Profit and Purpose, and for leveraging them to create value for the Group’s shareholders.
This business plan – lasting until 2020 – supports Skanska’s aspiration to deliver an industry-leading total shareholder return. This financial aim includes stable, long-term earnings and the cash flow necessary for an attractive dividend. The plan focuses on three areas, which are described in more detail on pages 12–14: • Great people• Market Making • Operational Excellence
Strategic actionsUnder the Profit with Purpose plan, key actions during 2017 included increasing investments in Project Development; driving collaboration to unlock synergies; establishing digital strategies; enhancing Skanska’s customer focus; promoting an inclusive culture; and launching a business-focused Green strategy. Additionally, a pri-mary focus was improving the profitability of the Construction stream.
Restructuring for profitabilityFollowing a strategic review initiated in fall 2017, at the beginning of 2018 Skanska announced a comprehensive restructuring to increase profitability. This involves downsizing operations with continuously low profitability or that are no longer stra-tegically important, as well as further increasing the Group’s focus on cost control and risk management. Also during 2018, a new Group managment structure will be implemented to increase organizational effectiveness and reduce costs.
2018 prioritiesBoosting Construction profitability and continuing to create value through Project Development – both while living Skanska’s values – are the Group’s fundamental prior-ities in 2018. Also, the Group will progress with purpose, such as providing customers with solutions based on innovation and sustainability, encompassing Safety, Ethics, Green, Community Investment and Diver-sity and Inclusion.
Aspirations 2020
• Industry-leading total shareholder return
• Balanced value creation between Construction and Project Develop ment
• Recognized as a preferred partner when it comes to creating solutions that meet customers’ needs
• Living our values and recognized as a value-driven company building for a better society
• An injury-free and ethical environ-ment
• The most attractive employer in the industry
• Cooperation within and between units and business streams as One Skanska in high-performing teams
•Improved operational efficiency
Focus areas within Sustainability
•Safety
•Ethics
•Green
•Community Investment
•Diversity and Inclusion
Skanska Annual Report 2017 9Business plan 2016–2020
Financial targets 2016–2020Skanska’s business plan for the period 2016–2020 sets financial targets that best reflect the profitability of operations and show the Group’s financial capacity for investment and growth.
Return on equity and on capital employed
are measures of how well shareholder
and lender capital are being used ( capital
efficiency), and are considered fair mea-
surements for the Group and the Project
Development business streams, respectively.
The operating margin is an expression
of the profitability and efficiency within
Construction. The margin is dependent on
the mix of contract types and the different
geographical markets.
Outcome 2017In 2017, Skanska reached its return target,
and its financial position remains strong,
powered by continued high performances
from Project Development. The Group’s
financial strength enables the continua-
tion of increased investments in Project
Development. As the value creation from
Project Development increases and starts to
balance the value created in Construction,
the outcome of the return targets for Project
Development can be maintained at stable
levels.
The operating margin in the Construction
stream was below the target, mainly due
to underperformance of some of the Con-
struction units outside the Nordic region.
To improve profitability a restructuring was
initiated, which led to impairment charges
of SEK 1.0 billion. Operating income was
also negatively affected by project write-
downs of SEK 1.5 billion. Adjusted for
impairments and write-downs, the operat-
ing margin in 2017 was 2.5 percent.
Financial targets 2016–2020 Outcome 2017
Group Group
Return on equity Return on equity was
≥ 18% 18.6%Financial strength Financial strength
Net operating financial
assets / liabilities
Net operating financial
assets / liabilities were
can be negative SEK 9.7 billionif opportunities arise
Construction Construction
Operating margin The operating margin was
≥ 3.5% 0.8%Project Development Project Development
Return on capital employed for
the combined Project Development
operations
Return on capital employed was
≥ 10% 14.5%Definitions are provided in note 44.
Skanska Annual Report 201710 Business plan 2016–2020
Sundtkvartalet, Oslo, Norway
Commercial Property Development and Construction
Skanska’s first office development in Norway fills five floors and 31,300 sq m, and is
loaded with such tenants as IBM and Manpower. It is a showpiece full of energy and
natural light that achieved the rigorous BREEAM Excellent environmental rating.
Less obvious are the ways that Sundtkvartalet and Skanska are improving the local
community. The Group leveraged the Construction period to provide unemployed
young adults with opportunities. In the completed building is a multipurpose hall
for schools and sports clubs – a city requirement that the Group implemented in
a model way. And to help residents move about the area, Skanska is contributing
a pedestrian bridge.
In 2017, Skanska sold the Group’s 50 percent ownership in Sundtkvartalet to the
project’s development partner for about SEK 830 M. Now established as an Oslo
developer, the Group has more local office properties on the way.
Developing places where people want to gather
Skanska Annual Report 2017 11Business plan 2016–2020
Skanska Annual Report 201712 Business plan 2016–2020
Great PeopleSuccess in Skanska’s project-based business depends on having people with the right skills and commitment, and who share the Group’s values. Recruiting and developing Great People are key priorities, as is becoming more diverse and inclusive.
Skanska aims to be the most attractive
employer in its industry. Progress toward
this was measured in 2017 through a first-
ever Group-wide employee survey. Out of
32 questions, 27 responses were significant-
ly above the general industry benchmark
provided by Korn Ferry Hay Group, which
has created one of the world’s largest data-
bases of employee opinion.
Enabling high-performing teamsThe Group helps employees do their best.
Skanska’s culture is based on transparency,
trust, values and high performance, with
employees collaborating in teams to build
for a better society. Employees are provided
many opportunities to learn and grow: pro-
fessional development benefits the entire
organization.
Broadening employees’ experiences is an
important means of development and boost-
ing organizational knowledge sharing and
collaboration, thereby driving performance.
Employees are provided opportunities to
work in different functions, Business Units
and geographies. Every management team
should have a member with experience from
other parts of Skanska.
Employee ownership shows engagementSeop, the Skanska employee ownership pro-
gram, helps build pride and an understand-
ing of creating shareholder value. Seop has
nearly 11,500 participants who invested
about SEK 350 M in 2017. In combination
with the Parent Company's holding of
Series B treasury shares securing the future
delivery of shares in Seop, they are the
largest Skanska shareholder in terms of capi-
tal. That high level of partici pation demon-
strates employees’ motivation and commit-
ment, which drives improved performance.
Strengthening customer connectionsThe Group is working to achieve a more
diverse workforce by attracting, recruiting
and retaining employees from more seg-
ments of society. This enables Skanska to
build better relationships with customers.
Also, a more diverse Skanska is able to lever-
age a greater variety of employee experiences
and perspectives, which is key to producing
the best customer solutions. Increased diver-
sity is coupled with including all employees
in Skanska’s culture. Improving diversity
and inclusion is a priority at every level of
the Group.
In Sweden, there’s a great need for engineers.
Yet in Sweden, engineers from other countries often have
trouble practicing their profession. The Skanska Interna-
tional Leadership Program aims to bridge that divide while
increasing Skanska’s diversity. This strategic recruitment
program starts with training and ends with jobs for many
participants. That’s how Diana Baghdo from Syria started
at Skanska – she’s now a crew leader.
Skanska Annual Report 2017 13Business plan 2016–2020
Market MakingMarket Making is about understanding customer needs so Skanska can collaboratively offer and deliver the best solutions, including innovations new to local markets. This requires staying close to customers, and proactive and structured ways of working. Skanska wants to be customers’ preferred partner.
Skanska seeks to align the Group’s broad talents and offerings to help customers suc-ceed. Essential to this is understanding the evolving needs and challenges of custom-ers, markets and government leaders. Early and ongoing engagement aids Skanska in developing the best, most sustainable solutions. Such early contractor involve-ment is increasingly valued by customers, especially those with highly challenging assignments.
Staying close to customers and other leaders can provide Skanska opportunities to shape markets and raise customer demands. This occurs through contributing insights related to Construction, Project Development and sustainability. Such sharing can better position Skanska for future success.
Values appreciated by customersSkanska’s values are key to the Group’s aspi-ration of being a preferred partner through creating solutions that meet customers’ needs. Customers and others appreciate how Skanska has integrated values into the Group’s culture and daily activities. Values help differentiate Skanska, as people want to collaborate with companies that are respon-sible and trusted.
Driving stronger customer focusSatisfied customers that lead to long-term part-nerships are key to Skanska’s success. The new Group Staff Unit Market Making is driving a stronger customer focus across Skanska. Also, it is improving how innovative Market Making activities are shared across the Group, helping Skanska better support customers.
Project Development requires deep awarenessA high level of market and customer aware-ness is increasingly important as Skanska boosts investments in Project Development. With development projects, Skanska is ini-tiating the creation of the building or infra-structure asset. Deep understandings of trends and market forces are key to maxi-mizing opportunities and lowering risks.
Broader perspectivesMore and more customers see success in multiple dimensions, including contributions to society. Skanska shares this perspective, so the Group seeks to broaden collaborations with customers to create holistic solutions that benefit local communities. This ampli-fies the benefits provided by projects.
Lease an entire floor for 10 years. Rent a desk for one hour. Or choose something in between. Increasingly, Skanska is developing office buildings that offer solutions for organi-zations of nearly any size. This provides access to the growing market for shared offices, and expands the Group’s tenant mix. Studio, in Malmö, Sweden, is one example.
Skanska Annual Report 201714 Business plan 2016–2020
Operational ExcellenceStrong results for Skanska and high customer satisfaction depend on excellence in the Group’s operations. Top priorities are increased process discipline, digitalization, collaboration and knowledge sharing. A focus on continuous improvement spans all of Skanska's activities.
Skanska is focused on continuously
improving all aspects of the Group’s opera-
tions. It means ensuring the right systems
and efficient processes are in place, as well
as relevant resources. Equally important
is that all employees have the proper skills.
Finally, it is about leveraging knowledge
and expertise across Skanska.
Stricter bid strategyThe Group has placed special focus on
improving construction project execution.
This begins with a stricter bid strategy.
Skanska prioritizes pursuing projects in
sectors and geographies in which the Group
has proven strengths. Also, the Group will
only bid on projects after identifying teams
with the right competencies. More broadly,
management of the design process, com-
mercial terms and project scope changes
are being given increased attention.
Digitalizing the businessSkanska has commenced a program to
enhance digital capabilities across the
Group. Digitalization presents enormous
opportunities to increase project delivery
certainty and efficiency, and to strengthen
collaboration and knowledge sharing. In
2017, all Business Units established digital
strategies, building on existing digital activ-
ities. These activities include building infor-
mation modeling (BIM), machine learning,
drones, robotics, 3-D printing, data analyt-
ics, autonomous equipment, and virtual and
augmented reality. Skanska’s Research and
Innovation function develops innovative
and more efficient ways of working.
Setting more common processesThe Group is increasing the use of com-
mon, proven project delivery practices. This
builds on Skanska Sweden’s work establish-
ing a more structured approach to deliver-
ing world-class projects. Such projects are
profitable, have high sustainability achieve-
ments, develop the skills of those who create
them and result in satisfied customers.
Implementing good practicesSkanska continues to use knowledge shar-
ing networks and capabilities to drive col-
laborative ways of working. Sharing and
adopting good practices from across the
Group improves performance and is a com-
petitive advantage.
Skanska in the UK is embedding digital rehearsals
into the project delivery process. Before on-site
activities begin, Skanska, key partners and some-
times the customer jointly practice the construction
process using a digital model to ensure proper plan-
ning and risk mitigation. Smaller rehearsals occur
during construction. These help boost safety while
increasing budget and schedule certainty.
Skanska Annual Report 2017 15
Autostrada A1, Gdańsk, Poland
Infrastructure Development and Construction
Stretching from Gdańsk on the Baltic Sea
south toward Poland’s central regions, this
152 km section of four-lane highway opened
in phases between 2007 and 2011. It replaced
a two-lane road that was narrow, congested
and accident stricken.
The new highway provides a fast and safe
link that has become essential to traveling.
It is also a major contributor to social and
economic development, opening new pos-
sibilities to live and work.
Skanska’s consortium was assigned respon-
sibility for financing, designing, building, op-
erating and maintaining this A1 stretch under
a 35-year public-private partnership (PPP) that
started in 2004. Construction included 137
bridges, including two large river spans.
In 2017, Skanska secured the value created,
divesting the Group’s 30 percent project own-
ership for about SEK 1.4 billion. Demand from
long-term investors is strong for such high-
quality infrastructure assets.
Making essential infrastructure reality
Skanska Annual Report 201716 Risk and opportunity management
Risk and opportunity managementSkanska has embedded proactive and structured risk and opportunity management at all levels of the organization. Consistency is enabled by Group-wide risk and opportunity management procedures. The breadth of the Group’s Project Development and Construction operations provides increased resilience to risks and greater ability to capture opportunities.
Journey of continuous improvementSkanska’s first formal risk management
tool applied throughout the Group was the
Operational Risk Assessment, introduced
in 1999. Since then, a suite of procedures
and tools to assess and manage risk and
opportunity during the project lifecycle has
been developed and refined.
Beginning in 2008, scrutiny and approval
of large and complex projects have been
managed at the Group level by the Skanska
Risk Team – a staff function providing scru-
tiny and analysis – and the Group Leader-
ship Team Tender Board, a decision making
body. The largest projects go to the Project
Review Committee of the Board of Direc-
tors for final approval.
Enhanced operational risk managementIn the 2020 Profit with Purpose Business
Plan, risk management is an important part
of the Operational Excellence focus area.
Building on the Skanska Risk Team and the
Group Leadership Team Tender Board, all
Business Units established their own risk
teams and project boards in 2016. This was
done to improve the quality and objectivity
of scrutiny at the operational level, enabling
Group-level reviews to add more value. In
2017, the Business Units further integrated
their risk teams and project boards into
their ways of working. The efforts to further
increase risk and opportunity management
continues in 2018.
Group-wide risk and opportunity management proceduresSkanska uses Group-wide procedures for
identifying and managing risks and oppor-
tunities: the Skanska Tender Approval
Procedure and the Skanska Investment
Approval Procedure.
Guided by the procedures, the Skanska
Risk Team supports the Group Leadership
Team by examining and analyzing tenders
along with investment and divestment pro-
Decision
Decision
Responsible
Responsible
Activity
Activity
Skanska Tender Approval Procedure: Construction and Infrastructure Development
Skanska Investment Approval Procedure: Commercial Property Development and Residential Development
posals subject to top management approval
– approximately 400 projects per year.
Initially, each Business Unit conducts risk
and opportunity assessments and identifies
measures for managing risks. The proposals
are then processed by the Risk Team, which
issues a recommendation based on the busi-
ness case, risks and opportunities. The final
decision is made by the Group Leadership
Team Tender Board and, in certain cases,
by the Board of Directors.
Business Unit
Preliminary
evaluation of the
project with a
focus on Skanska’s
core geographies,
competence,
customer, contract
and partners.
Business Unit
Land investment
with a focus on
location, zoning,
partners, environ-
mental issues and
return.
Business Unit Group Leadership Team
Proceed or abstain?
Business Unit Group Leadership TeamBoard of Directors
Proceed or abstain?
Business Unit
Draft tender
with a focus on
the main risks
and opportunities.
Business Unit
Launch of project,
considering pricing
and pre-sale rate
(Residential
Development only).
Business Unit Group Leadership Team Board of Directors
Submit tender
or abstain?
Business Unit Group Leadership Team Board of Directors
Proceed, hold,
re-develop or
divest?
Business Unit
Final tender
Business Unit
Start of project
with a focus on
main risks and
opportunities in
the market.
Business Unit
Divestment of
project with a focus
on the occupancy
rate and payment
terms (Commercial
Property Develop-
ment only).
Business Unit
Contract
negotiations
Business Unit Group Leadership Team Board of Directors
Proceed, hold,
re-develop or
divest?
Business Unit Group Leadership Team Board of Directors
Proceed or hold?
Business Unit Group Leadership Team Board of Directors
Execution accord-
ing to contract with
a continual focus
on monitoring risk
and opportunities.
Responsible
Responsible
Skanska Annual Report 2017 17Risk and opportunity management
Enterprise level
Large and complex projects receive additional scrutiny at the Group level.
Skanska’s diversity of projects across geographies and business streams
enable the Group to be better prepared about risks and opportunities.
Operational level
Business Units are further integrating more structured ways of
evaluating projects into their ways of working. At all operational
levels, every Skanska employee should be a manager of risk.
Project Level
Excellent management at the project level is the most
important element in Skanska’s ability to control risks
and maximize opportunities.
Skanska’s approachProactive and structured risk and oppor-
tunity management is embedded at every
level of the organization.
Enterprise levelEstablished by the Board of Directors,
Skanska’s Enterprise Risk Management
Policy sets out the structure and respon-
sibilities for risk management across the
Group. Enterprise risks are categorized as
strategic, operational, financial or regula-
tory, and for each category the policy details
the primary policies, procedures, regula-
tions and other controlling documents gov-
erning the management of risk.
Skanska’s wide diversity of projects
across geographies and business streams
enables the Group to be better informed
and better prepared about risks and oppor-
tunities.
Operational levelRisk management at the operational level is
governed by the Operational Risk System.
This system’s philosophy is that the process
of managing risks is an integral line man-
agement responsibility. At all operational
levels, every Skanska employee should be
a manager of risk. This system details how
Business Units organize for risk manage-
ment, and it acts as a roadmap for a suite of
risk and opportunity management proce-
dures, guidelines and templates.
The Skanska Tender Approval Proce-
dure and Investment Approval Procedure
control the level of authorization required
to proceed with Construction and Project
Development undertakings, respectively.
These procedures guide project teams
through a structured presentation of risks
and opportunities, facilitating scrutiny and
approval at the required level.
Each Business Unit has a Risk Heat Map
that records the competency of the unit to
execute projects: this is expressed in terms
of scope, size, geography and contract
model. Projects outside a Business Unit’s
core competency are subject to increased
scrutiny and higher level approval.
Project levelSkanska’s business is effectively an aggre-
gation of the Group’s projects. Excellent
management at the project level is the single
most important element in the ability to
control risks and maximize opportunities.
This depends on people being properly
equipped, trained and supported to bid,
negotiate and execute work. Business Units
and support units work together to ensure
that project teams are selected, trained and
supported so they deliver Profit with Pur-
pose every time.
To ensure that risks and opportunities
identified during project planning are man-
aged effectively during project execution,
an early warning process is used on larger
and more challenging projects within the
Construction business stream. Through
this, senior management is alerted if certain
events occur, or if key performance indica-
tors are outside a set tolerance level.
Benefiting from synergiesAn aspiration of the Profit with Purpose
Business Plan is to have a business that cre-
ates balanced value between Construction
and Project Development. Project Develop-
ment assignments involve Construction
Business Units, creating synergies that
provide many benefits related to risk and
opportunity management: enhanced com-
petitiveness; better ability to control risks
and maximize opportunities; and increased
chances to drive sustainability and innova-
tion. Overall, profitability and consistency
are increased.
These benefits are further enhanced
when different construction units, such as
building and civil, are involved and collabo-
rate on assignments for external customers.
Many of these advantages are also realized
when different Construction Business Units
collaborate on assignments for customers.
Skanska Annual Report 201718 Risk and opportunity management
Main risksSkanska conducts an annual Group-wide risk survey that involves more than
200 managers. This generates a ranking of enterprise risks: for each of the main
risks, the appropriateness and effectiveness of management and mitigation
measures are assessed and calibrated, as required. Skanska’s main risks are:
Loss or lack of key employees
Construction and development are most of
all people businesses. New project opportu-
nities will not be pursued unless employees
with the right competencies are available.
Skanska is focused on attracting, developing
and retaining a skilled, diverse and commit-
ted workforce, and providing an inclusive
workplace in which people can flourish and
everyone can contribute.
Ethical breach
A severe breach could inflict long-term dam-
age on Skanska’s reputation and ability to
participate in home markets, and it could
lead to financial penalties and other sanc-
tions. Skanska has proactively invested in
strengthening the Group’s ethics organiza-
tion and compliance processes, and has
taken many steps to bolster the ethical cul-
ture. The Code of Conduct provides employ-
ees with expectations for everyday behavior.
Project or systemic losses
Not every project or investment goes to
plan. Skanska has several layers of defense
to protect against one-off and Business
Unit-wide financial losses. These include the
Group’s procedures for scrutiny, approval,
follow-up, review and reporting, plus the
early warning system for all construction
projects subject to Group Leadership Team
Tender Board approval.
Macro financial instability
Macro-economic risks cannot be avoided, so
Skanska focuses on mitigating their effects
and ensuring the Group’s business is strong
enough to weather economic downturns.
Skanska Financial Services plays a lead role
in managing the Group’s financial exposure
and looking ahead at markets. The diversity
of Skanska’s operations provides significant
built-in resilience.
Accident with multiple people affected
Skanska’s Care for Life value directs the
Group to work safely or not at all. Skanska
continually works to improve the Group’s
culture of safety, health and well-being, and
regularly develops and enhances systems
and processes. The Group strives to learn
from others and to share what has been
learned.
Other risks
Skanska presents sustainability-related
risks – along with potential impacts and
mitigation strategies – on pages 82-83 of this
Annual Report. These risks encompass envi-
ronment; health and safety; human rights;
supply chain management; diversity and
inclusion; and anti-corruption and bribery
matters. Additionally, financial risks are pre-
sented on pages 68-69.
Skanska Annual Report 2017 19Risk and opportunity management
A complex project, structured for success
Ordsall Chord, Manchester, UK, Construction
How Skanska and customers collectively manage risks is an important factor in the
financial success of projects. Increasingly, customers are choosing to use contract struc-
tures that collaboratively and openly share risks and opportunities.
For Skanska, such contracts – called early contractor involvement, alliances or
integrated project delivery – are ways to execute large and challenging projects with
a reduced risk profile and the predictable performance desired by shareholders.
Early in the Ordsall Chord project, customer Network Rail, a Skanska joint venture
and two other contractors joined together in an alliance. An integrated project culture
underpinned by the collaborative contract was key to unlocking innovative approaches.
The alliance delivered this challenging project on budget and two years less than the
duration expected with a traditional approach. Furthermore, Skanska and the other
alliance companies achieved target financial margins with reduced risk.
Skanska Annual Report 201720 Focus areas within sustainability
Connected to the UN Sustainable Development GoalsSustainability at Skanska is grounded in the Group’s values, and supports the Profit with Purpose Business Plan. The Group’s five sustainability focus areas are strengthened by their connection to the United Nations’ Sustainable Development Goals. These goals further guide Skanska’s efforts to make the most significant positive contributions to society.
Driven by Skanska’s values, the Group helps
create sustainable futures for customers,
communities and employees. This is inte-
gral to Skanska’s purpose of building for
a better society, as well as delivering profit.
Skanska’s sustainability agenda consists
of five focus areas that are linked to those
values and most relevant to the Group’s
core Construction and Project Develop-
ment operations. The focus areas are Safety,
Ethics, Green, Community Investment,
and Diversity and Inclusion. During 2017,
a review was conducted of how the focus
areas best fit into an evolving Skanska and
society in general.
Significant ways to contributeThis review highlighted strong ties between
sustainability at Skanska and the United
Nations’ Sustainable Development Goals
(SDGs). The 17 SDGs are essential to the
2030 Agenda for Sustainable Development
adopted by the UN’s 193 member countries.
Achieving the SDGs depends on actions by
all of society, including governments and
the private sector.
Through the scale and type of Skanska’s
operations, the Group has significant
opportunities to contribute to society’s
needed solutions while running a profitable
business. In 2017, Skanska began using the
SDGs as a framework to measure the per-
formance and contributions of the Group’s
sustainability work. The SDGs have an
important role in the future of sustainabil-
ity at Skanska.
Increasing positive benefitsSkanska’s operations most directly con-
nect with Goal 11: Sustainable Cities and
Communities. Goal 11 is about making
cities inclusive, safe, resilient and sustain-
able – areas that Skanska can positively
impact. Also, in 2017 Skanska focused
on other closely related SDGs – see image
below. Through these SDGs, the Group
seeks to harness interconnected risks and
opportunities.
Skanska recognizes that the built
environment produces negative exter-
nal effects, both during production and
operation. Skanska strives to minimize
negative impacts and increase positive
benefits. Further information is provided
in Skanska’s Sustainability Report on
pages 70-83.Skanska recognizes relevance with many of
the 17 Sustainable Development Goals (SDGs).
During 2017, the Group focused on the SDGs
selected in the graphic below, most directly
Goal 11, Sustainable Cities and Communities.
Skanska Annual Report 2017 21Focus areas within sustainability
Sustainability focus areas
SafetySkanska is determined to eliminate injuries and support employees’ health and well-being.
In 2017, Skanska created a health and well-being strategy that focuses on ensuring healthy
workplaces, helping employees and workers to be physically and mentally fit so they can
perform at their best and live full lives. This includes providing improved practices to reduce
long-term health hazards, such as noise and dust. Health and well-being is an important way
of furthering Skanska’s caring culture, which underpins the Group’s safety approach.
Focusing on health and well-being extends Skanska’s caring culture.
Ethics Acting ethically and transparently is central to Skanska’s culture. Following the 2016 launch of
a new Code of Conduct, in 2017 all employees were trained on the expected behaviors. Code of
Conduct training is consistent across all Group operations, helping align behaviors. To help keep
ethics top of mind, employees are encouraged to have ethical dilemma discussions. Inspiration
for these discussions can be found in the growing library of value moments videos, which depict
real situations faced by Skanska employees.
Ethics is not a silent topic at Skanska. Regular conversations keep it top of mind.
Green During the year, Skanska set a new green strategy, which focuses on delivering profitable,
resilient and zero/low-carbon solutions to customers. This strategy also involves significantly
reducing the Group’s carbon footprint by 2030, in alignment with the Paris climate agreement.
Such steps support society and customer ambitions, and they reduce energy consumption,
carbon, materials and water use – driving Operational Excellence while lowering project costs.
In 2017, the environment organization CDP (Carbon Disclosure Project) recognized Skanska for
leadership in managing environmental impacts.
A new green strategy will significantly reduce Skanska’s
carbon footprint by 2030.
Community InvestmentBy leveraging the Group’s core competencies and business activities, Skanska seeks to address
local social challenges, together with customers, partners and communities. The aim is creating
shared value that provides long-term benefits to all stakeholders. In 2017, the Group set a new
Community Investment Guideline that focuses on three areas: educating youths; increasing
employability; and using design to help improve communities. Efforts continue to further inte-
grate Community Investment into Skanska’s business.
Shared value is created together with customers, partners and communities.
Diversity and InclusionSkanska continues to make progress toward the Group’s vision of mirroring society’s diversity
at all levels, and having leaders who excel in fostering an inclusive culture. Both employee sur-
vey results and headcount statistics demonstrate this advancement. With the 2017 Group-wide
employee survey, responses to diversity and inclusion questions were 3 and 6 percentage points
higher than the external benchmark. By improving with diversity and inclusion, Skanska can
better connect with customers and stakeholders, and has greater capacity for the creative
thinking needed to be most competitive.
Skanska’s success lies in welcoming people of all types, and enabling them to reach their full potential.
Skanska Annual Report 201722
Faster and safer journeys, one year early
Skanska Annual Report 2017 23
Highway 6 Taavetti-Lappeenranta, South Karelia, Finland
Construction
In the southeast corner of Finland, close to the Russian border, runs the VT6 high-
way. It’s the main axis through the region, and the road’s popularity led to much
congestion.
Skanska was part of the multidisciplinary alliance charged with widening and
improving a 28-kilometer stretch. Skanska, the Finnish Transport Agency and two
design firms collaboratively planned the project under a contract structure that
shared risks and rewards.
That joint effort, further strengthened by the diversity of the alliance’s people,
enabled trust and innovative approaches that enhanced operational efficiency.
Methods included advanced uses of technology, such as machine learning to support
quality control and safety. Also, drones for rapid and accurate quantity estimating.
It all led to the road opening one year ahead of schedule and people got an early
start to faster and safer journeys.
Skanska Annual Report 201724 Share data
Share dataSkanska’s Series B shares are listed on Nasdaq Stockholm, and the market capitalization on December 31, 2017, was SEK 69.5 billion. The last price paid for Skanska Series B shares in 2017 was SEK 170.0.
Around ten equity research analysts follow the company regularly. Under the Skanska share tab on Skanska’s website for investors is a list of these analysts, along with their current recommendations.
The stable underlying level of earnings in the Group is an result of risk diversification
• Skanska’s Series B shares (SKA B) are listed on Nasdaq Stockholm Bloomberg ticker SKAB:SS Reuters quote SKAb.ST
• Skanska has a sponsored American Depositary Receipt program (Level I) in the USA that is traded under the symbol SKBSY.
• In February 2017, Skanska’s share price reached a new record high of SEK 226.6.
• 109,951 shareholders.
• Market capitalization of SEK 69.5 bil-lion and a share price of SEK 170.0 on December 31,2017.
• In 2017, 2.3 million Skanska Series B shares were traded on average per day.
• The Board of Directors proposes a maintained dividend of SEK 8.25.
Market development 2017The Nasdaq Stockholm exchange had a positive development during the first six months, with a temporary drop during the summer. The exchange had a positive jour-ney in the beginning of second half of the year, ending 2017 up six percent for the year.
Dividend policySkanska’s dividend policy is to pay out 40–70 percent of the profit for the year as dividends to the shareholders, provided that the company’s overall financial condi-tion is stable and satisfactory.
DividendFor the 2017 financial year, the Board’s assessment is that the Group’s financial position remains strong and has proposed a maintained dividend of SEK 8.25 (8.25) per
Total return of the Skanska share compared to indices
across four business streams with opera-tions in several geographical markets and segments. This has contributed to Skanska’s increased or maintained ordinary divi-dend for more than fifteen years, as well as achieving a stable financial position that allows it to borrow at attractive rates.
Index
• Skanska B
0
50
100
150
200
250
300
20172016201520142013
0
50
100
150
200
250
300
20172016201520142013
• SIX Portfolio
Return Index• DJ Construction & Materials
Titans Total Return Index• SBI 1) Totalavkastning
Index
• Skanska B • SIX Portfolio
Return Index• DJ Construction & Materials
Titans Total Return Index• SBI 1 Total return
1 Strategic Benchmark Index consists of listed companies that, taken together, reflects Skanska’s operations.
1) Strategic Benchmark Index består av noterade företag som sammantagna avspeglar Skanskas verksamheter.The largest shareholders in Skanska AB, ranked by voting power, December 31, 2017
Shareholders % of votes % of capital
Industrivärden AB 23.9 6.9
Lundberg Group 12.4 4.7
Skanska employees through Seop 1 4.9 7.0
Alecta 4.8 6.8
Swedbank Robur Funds 3.0 4.3
AMF Insurance & Funds 2.7 3.9
BlackRock 1.5 2.1
Vanguard 1.4 2.1
Carnegie Funds 1.2 1.7
SEB Funds & Trygg Life Insurance 1.0 1.4
10 largest shareholders in Skanska 56.9 40.8
other shareholders in Skanska 43.1 59.2
Total 100.0 100.0
of which shareholders in Sweden 81.4 73.5
of which shareholders abroad 18.6 26.5
1 Not treated as a unified ownership group and includes the Parent Company’s holding of Series B treasury shares securing the future delivery of shares to the participants.
Source: Modular Finance Holdings
Skanska Annual Report 2017 25Share data
Skanska’s share price reached a new record high of SEK 226.6 in February 2017.
SEK bn
• Equity closing balance
• Equity closing balance, dividends restored
0
10
20
30
40
50
60
2017201620152014201320122011201020092008
Growth in equity
share. The proposal is equivalent to
a dividend totaling SEK 3,372 M (3,380),
corresponding to 69 percent of the profit
for the year.
No dividend is paid for the Parent Com-
pany’s holding of Series B treasury shares,
where the aim of the holding is to secure
delivery of shares to participants in
Skanska’s employee ownership program
(Seop). The total dividend amount may
change by the record date, depending on
repurchases of shares and the transfer of
shares to participants in Skanska’s long-
term employee ownership program.
OwnershipThe majority of Skanska’s shareholders
are financial and institutional organiza-
tions in Sweden. The largest shareholder is
Industrivärden AB, with voting power of
23.9 percent, followed by Lundberg Group
with voting power of 12.4 percent. The
Skanska employees in combination with
the Parent Company’s holding of Series B
treasury shares securing the future delivery
of shares in Seop is the largest shareholder
in terms of capital. During the year, foreign
ownership decreased to 19 percent of voting
power.
FundingSkanska has several borrowing programs
– both committed bank credit facilities
and market funding programs – which
provide good preparedness for temporary
fluctuations in the Group’s short-term
liquidity requirements and help ensure
long-term funding. In 2017, Skanska refi-
nanced the Revolving Credit Facility (RCF).
The new facility amounts to EUR 600 M
and has a 5-year term with two consecu-
tive 1-year extension options. Further, an
additional EUR 200 M RCF was established,
with a green profile and 2-year term with a
1-year extension option. In 2017, Skanska
established two 7-year private placements
amounting to USD 100 M respectively, in
order to extend the credit maturity profile
and to safeguard access to US dollars. No
new MTN bonds were issued during the
year. Short term funding needed due to sea-
sonality in cash flow, was covered through
commercial papers. At the end of the year,
the central debt portfolio amounted to
SEK 4.6 billion. The unutilized credit facili-
ties of SEK 8.2 billion combined with the
operating financial assets of SEK 9.7 billion
(which includes the central debt) ensure the
Group has sufficient financial capacity.
Skanska share history
2017 2016 2015 2014 2013
Year-end market price, SEK 170.0 215.1 164.8 167.9 131.4
Year-end market
capitalization, SEK bn 69.5 88.0 67.7 69.0 54.0
Number of shares for the year,
million 1 408.9 409.3 411.0 410.8 411.3
Highest share price during the year,
SEK 226.6 218.7 208.4 170.0 131.6
Lowest share price during the year,
SEK 170.0 149.2 151.4 126.7 104.6
Yield, percent 2 4.9 3.8 4.6 4.0 4.8
Earnings per share 3, SEK 12.01 15.89 11.96 9.98 8.43
Regular dividend per share, SEK 8.25 4 8.25 7.50 6.75 6.25
Dividend pay-out ratio 5, % 69 52 63 68 74
1 Number of shares outstanding at year-end.2 Dividend as a percentage of respective year-end share price.3 Earning per share according to segment reporting divided by the number of shares outstandning .4 Based on the dividend proposed by the Board of Directors5 Dividend as a percentage of earnings per share.
26 Market overview Skanska Annual Report 2017
Market overviewSkanska’s ability to grow and create value in its home markets is affected by a number of external factors. Some of these variables – macroeconomic as well as more sector-specific – are presented below.
Led by Norway, the Nordics have the highest level of construction investment as a
percentage of GDP of Skanska’s markets. In the USA, the level is much lower and
is far below pre-crisis levels, but is slowly increasing. The weaker intensity of con-
struction investments in other European countries can be primarily explained by
temporary lower use of EU funds in Central Europe.
The global upswing in economic activity during 2017 was also noticeable in Skan-
ska’s markets. The Central European countries continued to perform strongly,
while the Nordics showed synchronized growth. In the USA, the pick-up was driven
by the recovery in business investments. The only country reporting slightly slower
development was the UK, due to Brexit uncertainty.
Nordics Europe USA
%
0
2
4
6
8
10
12
14
20172016201520142013
Nordics Europe USA
%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
20172016201520142013
Construction investments in Skanska’s home markets as a percentage of GDPGDP growth in Skanska’s home markets
Skanska Annual Report 2017Market overview26
Skanska’s home markets
Population
= 10 million
people
Construction investments 2016
SEK 9,500 billion SEK 50 billion
USA
Sweden
Finland
Norway
United Kingdom
Denmark
Poland
Czech RepublicSlovakia
HungaryRomania
USA
Europe
Nordics
27Market overviewSkanska Annual Report 2017
The urban population is increasing all over the world, with an average of 70 percent
of the global population living in urban areas by 2050. All of Skanska’s markets are
above that average and have a higher degree of urban population.
Millions
of people
% of the total population
living in urbanized areas
Europe USANordics
0
50
100
150
200
250
300
350
400
205020161990
0
25
50
75
100
For years, the number of homes started has not matched the number of people
moving to urbanized areas. This has resulted in a large deficit in the supply of homes.
In 2017, the number of homes started was in line with 2016.
Increase in the number of people in urbanized areas, per year
Number of homes started, per year
People
Homes
0
50,000
100,000
150,000
200,000
250,000
2017201620152014201320122011201020092008
Homes constructed in relation to urbanization growth in Sweden, Norway and FinlandUrbanization in Skanska’s home markets
This corruption perception index goes from 0-100. The closer to 100 the better,
being less perceived as corrupt. The Central European countries are still struggling
with corruption issues, while the environment in the Nordic region is among the
best in the world.
The market share in Sweden is significantly higher than in the rest of Skanska’s
markets. Despite this Skanska is one of the leading companies in the USA and the
UK markets. The low market share in these countries is due to higher market frag-
mentation and competition.
0 20 40 60 80 100
Romania
Hungary
Slovakia
G20
Czech Republilc
Poland
USA
United Kingdom
Norway
Sweden
Finland
Denmark
Transparency index
0
1
2
3
4
5
6
7
8
USAUKCzech Republic
and Slovakia
PolandFinlandNorwaySweden
%
Market share, Skanska’s Construction business stream
The Property Clock indicates where the respective market is in the property cycle.
Skanska has a diversified portfolio of projects and land in different development
phases in the cities listed above.
Rentsfalling
Rents bottomingout
Rental growthslowing
Rental growth
accelerating
Budapest, Prague, Seattle
Malmö
Copenhagen, Boston
Katowice,
Houston
Stockholm, Gothenburg
Source: JLL, Q3, Q4 2017
Warsaw, Tri-City, Poznań, Bucharest
Kraków
Wrocław
Oslo
Łódź
Helsinki
Washington D.C.
Property clock
Sources: JLL, Central Statistics offices, SEB, HSBC, Citibank, Transparency International, UN Department of Economic and Social Affairs, World Bank.
Skanska Annual Report 2017 Market overview 27
Skanska Annual Report 201728 Market overview
Skanska Annual Report 2017 29Market overview
Sthlm New Creative Business Spaces, Stockholm, Sweden
Commercial Property Development and Construction
There’s a cool, new office district in Stockholm. It’s a place that a few
years ago was known as an industrial area. It’s just across the water
from hip Södermalm, but imagination was needed to see the great com-
mercial possibilities.
What Skanska imagined is now reality. Two office buildings have
been developed, and these were sold in 2017 for about SEK 1.3 billion in
total. Skanska will develop five other office buildings nearby, including
the 27-story Sthlm 01 under construction.
Skanska’s broad capabilities have produced a diverse and integrated
area. The initial office properties were built on top of a bus terminal the
Group was constructing below, providing operational synergies by lever-
aging various Construction competencies. And the offices buffer three
Residential Development projects emerging from a former heating plant.
Establishing Stockholm’s new hub for creative companies
Skanska Annual Report 201730 Business streams
Business streamsSkanska’s operations consist of Construction, Residential Development, Commercial Property Development and Infrastructure Development. The Business Units within these streams collaborate in various ways, creating operational and financial synergies that generate increased value.
Operating income 2
share of Group, % 1
Operating income
share of Group, % 1
Revenue
share of Group, % 1
Revenue
share of Group, % 1
Countries 3
Sweden
Norway
Finland
Poland
Czech Republic
Slovakia
UK
USA
Countries
Sweden
Norway
Finland
Poland
Czech Republic
SEK 13,237 MUSD 1,548 MEUR 1,373 M
SEK 150,050 MUSD 17,552 MEUR 15,569 M
SEK 1,716 MUSD 201 MEUR 178 M
SEK 1,205 MUSD 141 MEUR 125 M
Market drivers and key trends
GDP growth
– Growth in the Construction business
stream strongly correlates to growth
in GDP.
Public investment
– Infrastructure investments are largely
driven by the public sector.
Urbanization
– Urbanization brings an increasing need
for infrastructure to be expanded, which
increases demand for the Construction
business streams’ skills and products in
areas such as highways, bridges, mass
transit airports and water treatment works.
Market drivers and key trends
Household confidence indicator
– Potential customers’ views on future pay
raises, housing costs and borrowing oppor-
tunities affect decisions on whether to buy.
Urbanization
– More and more people are moving to cities,
leading to increased demand for homes.
Shortage of housing
– Housing production has lagged population
growth, resulting in an undersupply – more
homes need to be built. This means greater
demand for this business stream’s expertise
and products.
Construction
Residential Development
86 18
7.5 26
1 Before central and eliminations.
2 Operating income in Construction was negatively affected by impairment charges
of SEK 1.0 billion and project write-downs of SEK 1.5 billion.
3 Skanska has decided to down-size operations with continously low profitability
or are no longer strategically important. Read more on page 34.
Skanska Annual Report 2017 31Business streams
SEK 81 MUSD 9 MEUR 8 M
SEK 11,440 MUSD 1,338 MEUR 1,187 M
SEK 925 MUSD 108 MEUR 96 M
SEK 2,714 MUSD 317 MEUR 282 M
Operating income
share of Group, % 1
Operating income
share of Group, % 1
Revenue
share of Group, % 1
Revenue
share of Group, % 1, 2
Countries
Sweden
Norway
Finland
Denmark
Poland
Czech Republic
UK
Hungary
Romania
USA
Countries 3
Sweden
Norway
UK
USA
Market drivers and key trends
Economic growth
– Economic growth increases companies’
recruitment needs, which drives activity
in the leasing market.
Urbanization
– More people moving to cities increases
demand for offices and logistics centers
close to cities.
Cost-efficient location
– Energy-efficient, green premises in
attractive areas are in demand and are
contributing to relocation.
Attractive investment
– Long-term tenants in high-quality proper-
ties offer attractive returns for investors.
Market drivers and key trends
Lack of financing
– There is often insufficient public financing
for the new and expanded infrastructure
needed. Public-private partnerships (PPP)
allow such projects to be financed.
Lifecycle perspective
– Cost overruns in public projects increase
interest in PPP solutions, which have a lifecycle
perspective in which resource-efficient, inno-
vative and sustainable solutions are
delivered on time and for a fixed total cost.
Attractive investment
– Projects with stable, long -term cash flows
with public counterparties offer attractive
returns for investors.
Infrastructure Development
Commercial Property Development
6.5 42
0 14
1 Before Central and eliminations.
2 Accounted for according to the equity method.
3 The primary market going forward is the US market due to a thin pipeline of PPPs in Europe.
Skanska Annual Report 201732 Construction
Construction
Skanska Annual Report 2017 33Construction
For society to thrive, people need well-functioning workplaces, housing, transportation hubs, schools, hospitals and other key facilities. Construction – the largest business stream in terms of revenue and people – leverages Skanska’s local and Group-wide expertise and resources to enhance communities.
James A. Farley Post Office Building Renovation, New York City, USA
For 106 years, New York City’s Farley Post Office Building has been a grand presence along
Eighth Avenue. Now Skanska, with developers Related Companies and Vornado Realty Trust,
is transforming this landmark into a new way of accessing trains serving adjacent Pennsylvania
(Penn) Station, the Western Hemisphere’s busiest transit hub and one of the most crowded.
The new portal, called the Moynihan Train Hall, will feature a spectacular 3,300 sq m sky-
light supported by original steel trusses. Natural light will illuminate the main concourse area,
with restaurants, shops and escalators to train platforms below.
This large and complicated assignment requires the combined strengths of Skanska USA
Building and Skanska USA Civil, working together under a roughly SEK 11 billion design-build
contract. All work is being carefully executed to ensure safe and smooth passages of people
and trains currently using Penn Station.
Moynihan Train Hall will be the third major New York City transportation hub delivered by
Skanska, joined by the World Trade Center hub and the ongoing LaGuardia Airport Central
Terminal B redevelopment.
Skanska Annual Report 201734 Construction
Major events 2017Despite a very strong performance in the
Nordic region during 2017, the profitability
of the Construction stream was impacted
by the underperformance of some Con-
struction units outside the Nordics.
Operating income amounted to SEK
1.2 billion, with a corresponding operat-
ing margin of 0.8 percent. The operating
income in 2017 was negatively affected
by impairment charges of SEK 1.0 billion
related to the decision to down-size opera-
tions with continuously low profitability
or are no longer strategically important. In
addition, operating income was affected
by project write-downs of SEK 1.5 billion,
of which SEK 360 M and SEK 640 M in the
UK and USA, respectively, relate to project
delays and not achieving estimated produc-
tion rates. Write-downs of SEK 500 M in
Poland relate to cost escalation and claims
mainly in completed projects.
Market outlook 2018The overall construction market outlook
continues to be positive.
The non-residential and civil markets
in Sweden are very strong, although the
landscape is competitive. The residential
building market is slowing down slightly.
In Norway, the outlook for the civil market
remains positive, but with significant com-
petition in new bids. The non-residential
market also benefits from increased public
investments, while the residential building
market is stable with the exception of cer-
tain regions that are dependent on the ener-
gy sector. The overall market situation in
Finland is steadily improving.
In the UK the uncertainty in the non-
residential building market related to Brexit
continues to have a negative impact. In
Central Europe the overall market situation
is relatively stable even though the Czech
Republic civil market is experiencing sig-
nificant competition.
In USA the overall market is strong. The
civil construction market remains good,
although competition is intense, and the
building construction market is strong in
the aviation, education, data center, life-
science and healthcare sectors.
Business operations in 2018Actions to restore profitability have been
initiated and consists of restructuring of the
Polish construction operations, exiting the
power sector in the USA, focusing on core
business in the UK and continuing to adapt
to tougher market conditions in the Czech
Republic. Moreover, focus on cost control
and risk management will further increase
going forward.
ConstructionThe performance in 2017 was strong in the Nordic region and in USA Build-ing, while the underperformance in Construction units outside the Nordic region impacted the profitability of the Construction stream negatively.
Construction
SEK M 2017 2016 2015 2014 2013
Revenue 150,050 138,001 140,648 128,663 118,976
Operating income 1 1,205 3,546 3,874 4,508 3,880
Operating margin % 0.8 2.6 2.8 3.5 3.3
Free working capital, SEK bn 21.8 22.5 20.5 18.1 18.5
Operating cash flow 2,136 4,562 6,803 2,979 3,470
Order bookings, SEK bn 151.8 170.2 122.1 146.9 113.9
Order backlog, SEK bn 188.4 196.3 158.2 170.5 134.5
Number of employees 39,002 40,991 42,193 42,397 40,854
1 Operating income for 2017 was negatively affected by impairment charges of SEK 1.0 billion relating to the restructuring of construction units outside the Nordics. Adjusted for these charges, the operating margin in 2017 was 1.5 percent.
Targets and actions – business plan 2016–2020
• Controlled growth –
stable organizations
• Decrease number of loss-making
projects through enhanced risk
management
• Operational efficiency
• Operating margin ≥3.5%
• Early Contractor Involvement (ECI)
• Continued focus on working capital
Selection of competitors
• Balfour Beatty
• Ferrovial
• Granite
• Grupo ACS
• Hochtief
• NCC
• PEAB
• Strabag
• Veidekke
• VINCI
Skanska Annual Report 2017 35Construction
• Building construction, 48%
• Civil construction, 43%
• Residential, 5%
• Service 1, 4%
1 Facilities management or maintenance contract.
• Government, 62%
• Corp. Industrial, 17%
• Commercial Development, 7%
• Residential Development, 6%
• Institutional 2, 5%
• Other, 3%
2 Mainly private healthcare and educational institutions.
• Nordics, 37%o/w Sweden, 23%
• Europe, 22%
• USA, 41%
Customer structure
Revenue and operating margin, rolling 12 months
Order backlog, total SEK 188 bn Type of product
Revenue, total SEK 150 bn Geographic area
Value creation in Construction
Skanska’s Construction business stream builds and renovates
buildings, industrial facilities, infrastructure and residences. It also
executes service-related assignments, in areas such as construction
services and facility operations and maintenance.
In keeping with Skanska’s business model, contracting as-
signments are also executed for Skanska’s Project Development
streams. This collaboration generates large construction assign-
ments, as well as synergies for the Group.
Project and synergy opportunities are also generated thanks to
the financial expertise and resources within the Group. A combina-
tion of financial strength and global expertise in Construction and
Project Development enables Skanska to take on large, compli-
cated projects for international customers with high expectations
for quality and execution. In the very largest projects that require
high-level performance guarantees, few competitors can measure
up to Skanska in terms of skills and strength.
With a strong risk-assessment focus during the tender stage,
Skanska concentrates on securing the right projects, for which
there is a balance between risk levels and expected margins.
Skanska’s ambition is to increase its share of contracts, in which
customers value service, quality and reliability – in addition to
price – when evaluating tenders. Skanska’s clear focus on sustain-
able development – including Safety, Ethics, Green, Community
Investment, and Diversity and Inclusion – is also a factor that
strengthens Skanska’s offering to customers.
% SEK bn
• Operating margin • Revenue
0
1
2
3
4
5
20172016201520142013105
110
115
120
125
130
135
140
145
150
Order backlog
SEK 188 bn
Skanska Annual Report 201736 Residential Development
Residential Development
Skanska Annual Report 2017 37Residential Development
BoKlok Production Plant, Gullringen, Sweden
Construction industry productivity isn’t what it should be. Other sectors, such as
manufacturing, have increased productivity at much higher rates in recent de-
cades. To improve, construction needs to think differently. Industrialized methods
are one important solution.
That future is already reality at BoKlok (Live Smart), the affordable residential
concept jointly owned by Skanska and Ikea.
At this main BoKlok plant, 180 employees produce truck-sized modules nearly
ready for living. These standardized sections – comprising multiple rooms – depart
outfitted with tile walls, Ikea cabinets, windows and doors. Every year, this fac-
tory produces some 1,570 modules, which become about 700 homes. This highly
efficient approach helps ensure worker safety and high quality, while minimizing
wasted materials. Also, it enables low costs, which make BoKlok’s affordable
prices possible.
From here, the modules are encased in plastic and transported throughout
Sweden. Within days they are assembled into buildings of up to four stories, plus
time for final touches and site works. Strategic partners produce BoKlok modules
for Norway and Finland.
With housing costs high, demand for smartly designed BoKlok homes is strong.
An expansion will increase this plant’s production capacity by almost 50 percent.
In 2017, BoKlok represented about half the homes Skanska sold in Sweden.
Modern families want homes that are well-designed, responsibly produced, reasonably priced and in good locations. Residential Development teams up with the Construction business stream to efficiently provide homes that help make people’s lives better and easier.
Skanska Annual Report 201738 Residential Development
Residential DevelopmentThe Residential Development stream continued to improve its performance during the year, with returns significantly above targets and operating income reaching an all-time-high of SEK 1.7 billion. Demand tends to be durable in the affordable and core segments, where Skanska mainly operates.
Major events 2017In 2017, profitability within Residential
Development was even stronger than in
2016 . Performance was good in all markets,
particularly in Sweden and Norway. Oper-
ating income reached an all-time high and
the return targets of 10 percent operating
margin and 10 percent return on capital
employed were clearly surpassed.
BoKlok, the affordable homes business,
also made a noticeable contribution with
its high operational efficiency and sizable
returns. In 2017, BoKlok represented about
half the homes Skanska sold in Sweden.
During the year, 4,318 (4,848) homes
were started and 4,285 (4,603) were sold.
A majority of the homes were started and
sold in Sweden.
Market outlook 2018In the residential market segments that
Skanska’s product range is targeting, the
Swedish market has slowed down to a stable
environment and the Norwegian market
remains stable but with increased uncer-
tainties. In both these markets customers
are showing signs of delayed decision mak-
ing. The Finnish market is steadily improv-
ing and the Central European market is
solid. Common to all home markets is the
challenge to acquire and develop land, due
to high prices and long permitting pro-
cesses.
Business operations 2018Skanska aims to increase investments in
Residential Development in order to enhance
profitability.
Targets and actions – business plan 2016–2020
• Controlled growth
• Design to cost
• Increased capital efficiency
• Increase landbank
• Establish Residential Development
Europe in Warsaw
Selection of competitors
• Bonava
• Central Group
• DOM Development
• Finep
• JW Construction
• JM
• PEAB
• YIT
Residential Development
SEK M 2017 2016 2015 2014 2013
Revenue 13,237 13,264 12,298 9,558 9,234
Operating income 1,716 1,605 1,174 683 573
Operating margin, % 13.0 12.1 9.5 7.1 6.2
Investments –11,093 –9,148 –6,675 –6,871 –6,961
Divestments 11,773 7,517 8,630 8,939 7,980
Operating cash flow from business operations 1 1,229 –1,210 1,509 1,830 446
Capital employed, average, SEK bn 12.7 11.6 9.3 10.4 10.8
Return on capital employed, % 2 15.4 17.1 14.4 7.1 7.4
Number of employees 482 434 389 396 419
1 Before taxes, financing activities and dividends.2 A definition is provided in note 44.
Skanska Annual Report 2017 39Residential Development
Generating value in Residential Development
Generating value in Residential Development begins with an
analysis of macroeconomic and demographic trends. Where is
the growth, who are the target groups and what do they need
and want?
Before making land purchases, Skanska analyzes local conditions
in detail. Then begins a step-by-step process aimed at ultimately
offering customers the best possible value. During the planning
stage, Skanska establishes a framework in close collaboration
with the municipal authorities. Based on the potential offered by
the site’s surroundings, a neighborhood with a distinct character
is created. An attractive neighborhood is designed and built on
the basis of the residents’ needs and environmental consider-
ations. Skanska’s own sales organization then markets the new
homes to the right target groups.
Value
4. Sales and construction
5. Customer care
Land purchaseAdvance booking
before production start Move-in
3. Marketing and pre- construction engineering
2. Planning and permitting
1. Concept and analysis
5–7 years Time
Sold under construction Unsold under construction Unsold completed
Homes
0
2,000
4,000
6,000
8,000
10,000
Q4Q3Q2Q1
2017
Q4Q3Q2Q1
2016
Q4Q3Q2Q1
2015
Q4Q3Q2Q1
2014
Q4Q3Q2Q1
2013
Started Soldo/w Sweden o/w Sweden
0
1,000
2,000
3,000
4,000
EuropeNordics
Homes
• Nordics, 95%o/w Sweden 63%
• Europe, 5%
Homes under construction and unsold completed
Homes started and sold
Revenue and operating margin, rolling 12 months
% SEK bn
• Operating margin • Revenue
0
2
4
6
8
10
12
14
16
201720162015201420130
2
4
6
8
10
12
14
16
7,243homes under construction
Operating income, total SEK 1.7 bn Geographic area
Skanska Annual Report 201740 Commercial Property Development
Commercial Property Development
Skanska Annual Report 2017 41Commercial Property Development
Five, Prague, Czech Republic
History was important to executing this project. After all, it involved transforming a
70-year-old tram depot into a modern office building.
In leasing Five’s 14,400 sq m, history proved vital too. A few years earlier, Skanska
sought to attract global healthcare company MSD to a nearby office development
called Riverview. A relationship was established, and trust built. MSD secured 90 per-
cent of that building for its Global IT Innovation Center.
The success of MSD´s Riverview operations resulted in more space being needed.
When Skanska acquired an adjacent plot to develop Five, the dialogue continued. Five
would be another distinctive, innovative and green building backed by the Group’s com-
mitment to MSD. Naturally, this included handling both development and construction
to ensure a smooth and efficient delivery. MSD agreed to lease 80 percent of Five.
“The concept of Skanska’s buildings resonates fully with the philosophy and the
needs of MSD,” says Richard Branton, MSD Vice President and Chief Technology Officer.
In 2017, Skanska sold Five for about SEK 480 M. The property has achieved the top
LEED Platinum green building certification, and has a rooftop terrace providing views
of two castles.
Skanska creates healthy, environmentally responsible and customer-focused offices and properties. Commercial Property Develop ment initiates, develops, leases and divests properties built by Skanska’s Construction business stream. These build-ings contribute to tenants’ well-being and creativity.
Skanska Annual Report 201742 Commercial Property Development
Commercial Property DevelopmentGains from property divestments were the highest ever, reaching more than SEK 3.5 billion, including joint ventures. At the same time investments in new projects continued to grow with 24 new projects started during the year.
Commercial Property Development
SEK M 2017 2016 2015 2014 2013
Revenue 11,440 10,226 9,034 10,228 6,206
Operating income 2,714 2 ,336 1,947 1,700 1,068
of which gain from divestments of properties 1 2,879 3,111 2,564 1,989 1 ,415
Investments –10,716 –8,364 –8,826 –6,885 –4,514
Divestments 9,341 9,043 9 ,914 8,237 6,954
Operating cash flow from business operations 2 –3,119 –687 917 1,174 1,722
Capital employed, SEK bn 24.5 19.9 16.5 15.0 13.5
Return on capital employed, % 3 15.5 14.8 15.6 11.4 10.7
Number of employees 389 364 344 304 279
1 Additional gain included in eliminations was 197 173 190 279 112
2 Before taxes, financial activities and dividends.
3 A definition is provided in note 44.
Major events 2017The high level of activity in terms of invest-
ments, leasing and divestments continued
during the year, and by the end of 2017
Skanska had 46 ongoing projects. Gains
from divesting 27 property projects reached
an all-time high of SEK 3.5 billion including
joint ventures, with all three geographies
contributing to this success. For example:
In April, Skanska sold its residential proj-
ect Ö-huset in Copenhagen, Denmark, for
about SEK 1.1 billion.
In Kalmar, Sweden, three buildings at
Linnaeus University were divested in June,
for a total value of about SEK 1.1 billion.
In December, Skanska sold The Monu-
ment Building in London, UK, for about
SEK 1.3 billion and its Watermark Seaport
multi-family development in Boston, USA,
in partnership with Twining Properties, for
about SEK 510 M.
In 2017, a total of 24 projects were started,
spread across all geographies. Leasing
activity reached an all-time high, with
477,000 sq m leased during the year. Unre-
alized gains, excluding properties divested
according to segment reporting, totaled
SEK 7.9 billion by the end of the year.
Market outlook 2018Vacancy rates for office space are stable in
most of the Nordic and Central European
cities where Skanska has operations. In
Sweden vacancy rates are low and rents are
rising. Demand for office space is strong in
Poland and continues to improve in other
parts of Central Europe. In USA, demand
from tenants continues to improve in
Washington D.C. and remains strong
in Boston and Seattle, while demand in
Houston’s energy corridor is somewhat
weaker due to low oil prices.
Modern properties with high quality
tenants are in demand from property inves-
tors, resulting in attractive valuations for
these properties. Investor appetite remains
strong in the Nordics, especially Sweden,
USA and Central Europe.
In all home markets there is a challenge
to acquire and develop land due to high
prices and long permitting processes.
Business operations 2018Skanska aims to increase investments in
Commercial Property Development in
order to enhance profitability.
Targets and actions – business plan 2016–2020
• Increase project activity
• Increase landbank
• Drive cost efficiency
• Consider expansion in
Central Europe and USA
Selection of competitors
• Boston Properties
• Diligentia
• Echo investment
• Ghelamco
• Hines
• Lemminkäinen
• NCC
• Trammell Crow
• Vasakronan
Skanska Annual Report 2017 43Commercial Property Development
• Nordics, 36%
• Europe, 33%
• USA, 31%
• Nordics, 33%
• Europe, 39%
• USA, 28%
Value creation in Commercial Property Development
The development of commercial projects is a continuous process
with a number of clearly defined phases. The average development
cycle from project idea to completion is five to seven years.
All acquisitions of land are preceded by macroeconomic and
local market analysis. A major step in value creation is taken when
the zoning plan is approved for undeveloped land. The design
is based on previous experience and adjusted to local market
demands, aimed at creating appropriate premises for tenants and
property investors as well as enabling efficient construction
execution. A successful leasing process usually begins in connection
with the start of construction, with most leases signed before
construction is completed. The construction projects are carried
out by Skanska’s local construction units. Property management
and work with customers can add further value to the property.
All projects are developed with divestment as the ultimate goal.
Divestment occurs when Skanska has provided maximum value
to the project within its competency areas.
5–7 years Time
Value 5. Divestment
1. Building permit and zoning
2. Design and pre-construction
3. Construction and leasing
4. Property management
Revenue and operating income from property divestmentsUnrealized and realized gains
LandUnrealized gains in: Ongoing projects Completed projects
Realized gains, rolling 12 months
SEK bn
0
1
2
3
4
5
6
7
8
9
10
Q4Q3Q2Q1
2017
Q4Q3Q2Q1
2016
Q4Q3Q2Q1
2015
Q4Q3Q2Q1
2014
Q4Q3Q2Q1
2013
SEK bn
• Revenue from divestments, rolling 12 months
• Operating income from divestments, rolling 12 months
0
2
4
6
8
10
12
14
Q4Q3Q2Q1
2017
Q4Q3Q2Q1
2016
Q4Q3Q2Q1
2015
Q4Q3Q2Q1
2014
Q4Q3Q2Q1
2013
Unrealized gains of
SEK 7.9 bn
Leasing, total 477,000 sq m Geographic area
Capital employed, total SEK 24.5 bn Geographic area
Skanska Annual Report 201744 Infrastructure Development
Infrastructure Development
Skanska Annual Report 2017 45Infrastructure Development
New Karolinska Solna, Solna, Sweden
For eight years, New Karolinska Solna has been a design and construction project,
until recently Skanska’s largest. Creating it required three Skanska Business Units,
and at peak production 250 of the Group’s managers and 2,000 workers were on-
site. They pioneered uses of technology, environmentally responsible methods and
public-private partnership PPP. Each phase was delivered on time and on budget.
Now construction is complete. With the handover of the final phase in December
2017, it is now fully Karolinska University Hospital’s new facility. The first patients
were recieved in 2016 and the remaining patients will move in during 2018.
“The facilities that NKS gives us… really strengthen our ability to deliver highly
specialized care to provide patients with the best healthcare,” says Melvin Samsom,
Karolinska’s CEO.
Under the PPP agreement, Swedish Hospital Partners, in which Skanska has a
50 percent ownership, was responsible for financing, designing and constructing
this 330,000 sq m facility and are now taking the responsibility to maintain the
facility and manage its lifecycle costs in cooperation with the client until 2040.
This business stream advances essential infrastructure such as hospitals, roads and airports, using Skanska’s financial and development expertise and resources. These public-private partnerships – that the Construction business stream executes – provide optimal solutions for each project’s entire lifecycle.
Skanska Annual Report 201746 Infrastructure Development
Infrastructure DevelopmentSkanska divested three projects, one of which was the A1 project in Poland, generating a significant gain during 2017. The primary market going forward will be the US market.
Major events 2017In 2017, three projects in Infrastructure
Development were divested, generating
a significant gain for Skanska. In the first
quarter Skanska divested the A1 motorway
project in Poland for about SEK 1.4 billion.
The net present value of projects at the
end of the period decreased to SEK 3.0 bil-
lion (4.3). The decrease is mainly attribut-
able to the divestment of the A1 motorway
project and the divestment of Skanska’s
shares in two wind farms in Sweden. The
unrealized development gain in the project
portfolio amounted to SEK 0.5 billion at the
end of the year.
Market outlook 2018The public-private partnership (PPP) market
in the USA is strong, albeit with considerable
competition. In other markets the pipeline
is thin, with opportunities being seen in the
Norwegian market.
Business operations 2018The work is now focused on bringing exist-
ing projects into a fully operational state,
while selectively pursuing new projects.
Furthermore, with a thin pipleine of PPPs
in Europe, the primary market going for-
ward is the US market.
Targets and actions – business plan 2016–2020
• Maximize the value of
existing portfolio
• Growth in the USA
• Downsize European operations
Selection of competitors
• Balfour Beatty
• Ferrovial
• Grupo ACS
• VINCI
Infrastructure Development
SEK M 2017 2016 2015 2014 2013
Revenue 81 237 106 163 87
Operating income 925 1,818 863 463 401
Investments –449 –1,336 –234 –328 –75
Divestments 1,950 3,102 1,114 419 242
Operating cash flow from business
operations 1 4,096 –1,045 1,258 –106 108
Capital employed, SEK bn 1.8 5.4 1.8 1.9 2.0
Return on capital employed, % 2 3.6 41.1 12.7 16.9 17.5
Net present value, project portfolio,
SEK bn 3.0 4.3 4.8 5.3 4.9
Employees 94 102 111 127 130
1 Before taxes, financial activities and dividends.2 A definition is provided in note 44.
Skanska Annual Report 2017 47Infrastructure Development
Value creation in Infrastructure Development
Public-private partnership is a form of public procurement in which a project company owned by private companies is given responsibility for developing, financing, building, operating and maintaining public facilities such as large hospitals, schools, airports and highways. As the investment is partially or entirely privately financed, public sector customers’ costs can be spread over a longer period of time. A life cycle perspective is used to create resource-efficient, innovative and sustainable solutions.
The project company’s incentives become benefits for the customer:– Established total cost. An insurance against financial surprises.– A fixed annual price. The customer pays agreed compensation
over a predetermined period.– Delivery on time with the right quality. Compensation is only
paid once the facility goes into operation.– Frees up resources. Having a counterparty with overall responsi-
bility allows the customer to focus on its core operations.
Projektutveckling0−3 år
Tillgångsförvaltning3+ år Tid
Kontrakteringoch finansiering
Värde
4. Byggande
3. Anbudsgivande och förhandling
2. Kvalificering
1. Identifiering
5. Uppstart av driftsfas
Project Development0−3 years
Asset management3+ years Time
Award or financial close
Value
4. Construction
3. Bid and negotiation
2. Qualifying
1. Identifying
5. Ramp up of operations
6. Steady state
6. Drift
SEK bn
0
1
2
3
4
5
Dec 31,
2017
Currency
effect
Investments/
Divestments
Time value/Reduced
discount rate
Dec 31,
2016
0.2 –1.4
–0.1
4.3
3.0
Mdr kr
0
1
2
3
4
5
31 dec,
2017
Valuta-
effekt
Investeringar/
Desinvesteringar
Tidsvärde/
Riskminskning
31 dec,
2016
0,2 –1,4
–0,1
4,3
3,0
Compensation type
• Norden, 40%
• Europa, 3%
• USA, 57%
• Bygg, 25%
• Ramp-up, 75%• Construction, 25%
• Ramp-up, 75%
• Nordics, 40%
• Europe, 3%
• USA, 57%
• Market risk, 44%
• Availability risk, 56%• Marknadsrisk, 44%
• Tillgänglighetsrisk, 56%• Norden, 40%
• Europa, 3%
• USA, 57%
• Bygg, 25%
• Ramp-up, 75%• Construction, 25%
• Ramp-up, 75%
• Nordics, 40%
• Europe, 3%
• USA, 57%
• Market risk, 44%
• Availability risk, 56%• Marknadsrisk, 44%
• Tillgänglighetsrisk, 56%
• Norden, 40%
• Europa, 3%
• USA, 57%
• Bygg, 25%
• Ramp-up, 75%• Construction, 25%
• Ramp-up, 75%
• Nordics, 40%
• Europe, 3%
• USA, 57%
• Market risk, 44%
• Availability risk, 56%• Marknadsrisk, 44%
• Tillgänglighetsrisk, 56%
Phase Changes in net present value
Gains from divestments
SEK 1.0 bn
Project portfolio, estimated gross value, total SEK 3.8 bn Geographic area
Skanska Annual Report 201748 Infrastructure Development
Estimated annual cashflow in Skanska Infrastructure Development’s project portfolio December 31, 2017 1
SEK M
• Inflow: SEK 34 bn (interest, dividends and repayments) • Outflow: SEK –1.8 bn (contracted future investments)
1 Cash flows have been translated into SEK at the exchange rates prevailing on December 31, 2017.
–500
0
500
1,000
1,500
2,000
207020652060205520502045204020352030202520202018
Project portfolio, SEK M
Category Type Country
Payment
type Phase
Concession
end Ownership
Year of
Operation/ full
completion
Invested
as per Dec 31,
2017
Total
Commitments
Highways
Elizabeth River Tunnels Highway USA Market risk Ramp-up 2070 50% 2017 793 793
I-4 Ultimate Highway USA Availability Construction 2054 50% 2022 0 602
Social infrastructure
New Karolinska Solna Health Sweden Availability Ramp-up 2040 50% 2018 591 591
Papworth Health UK Availability Construction 2048 50% 2019 0 61
Airports
LaGuardia Airport USA Market risk Construction 2051 32% 2024 0 519
Total Skanska 1,384 2,566
Essex BSF, Bristol, Essex Woodlands were sold during 2013; Skanska Infrastructure Development retains indirect interest in project through its participation in the Local Education Partnership. For more info see note 20 B.
Skanska Annual Report 2017 49Corporate governance report
Corporate governance report 1
Good corporate governance ensures that Skanska is man-aged sustainably, responsibly and as efficiently as possible on behalf of all shareholders. The overall goal is to increase value for the shareholders and in doing so meet their expectations for invested capital. The purpose of the corporate governance is also to ensure oversight by the Board of Directors and management. By having a clearly-defined structure as well as proper rules and processes in place, the Board of Direc-tors can ensure that management and employees are focused on developing the business and thereby generating value for shareholders.
Corporate governance principlesSkanska AB is a Swedish public limited company. Corporate gov-ernance for Skanska AB and its subsidiaries (Skanska) is based on both external and internal governing documents and on moni-toring compliance with these by all units and functions in the organisation. The most important governing documents are the following:
External governing documents
• Swedish Companies Act
• Nasdaq Stockholm Rule Book for Issuers
• Swedish Corporate Governance Code (the Code)
• Annual Accounts Act
• International Financial Reporting Standards (IFRS) and other accounting rules
Internal governing documents
• Articles of Association
• Procedural Rules for the Board of Directors and Board Committees
• Instructions for the CEO
• Financial Policy
• Information Policy
• Risk Management Policy
• Skanska’s Code of Conduct is available on Skanska’s web-site https://group.skanska.com/corporate-governance/governing-documents/
Skanska has no deviations from the Code to report for the 2017 financial year. Nor has Skanska been subject to any rulings by Nasdaq Stockholm’s Disciplinary Committee or decisions on breaches of sound practices in the stock market by the Swedish Securities Council.
ShareholdersSkanska AB’s Series B shares are listed on Nasdaq Stockholm in the Large Cap segment. The share capital at the end of 2017 amounted to SEK 1,259,709,216 shared between a total of 419,903,072 shares, of which 19,755,414 are Series A shares and 400,147,658 are Series B shares. The company’s Series A shares entitle the holders to ten votes per share and the Series B shares to
one vote per share. Series A and B shares carry the same right to share in the company’s assets and entitle the holder to the same dividend. There are no restrictions on the number of votes each shareholder may cast at an Annual General Meeting.
At the end of 2017 Skanska had a total of 109,951 shareholders according to statistics from Euroclear Sweden. The ten largest shareholders held 56.9 percent of the votes and 40.8 percent of the capital. Industrivärden’s holding amounted to 23.9 percent and Lundberg’s holding to 12.4 percent of the votes.
More information about the Skanska share and shareholders is available on page 24.
Annual General MeetingThe shareholders’ meeting is the highest decision-making body within Skanska and it is where shareholders exercise their influ-ence over the company. At the Annual General Meeting (AGM) the shareholders decide on key issues, such as adoption of income statements and balance sheets, the dividend, the composition of the Board of Directors, discharging the members of the Board and the CEO from liability, election of auditors and principles for remuneration to senior executives. Skanska’s financial year is from January 1 to December 31 and the AGM is to be held within six months of the end of the financial year. The date and venue for the AGM is communicated no later than in connection with the publishing of the third quarter interim report on the company’s website. The notice to attend is published in Post- och Inrikes Tidningar (the Official Swedish Gazette) and on Skanska’s website. An announcement of the convening of a meeting is published in Dagens Nyheter and in at least one more daily newspaper. All doc-uments pertaining to the AGM are published on Skanska’s website in both Swedish and English. Shareholders listed in the register of shareholders on the record date who notify the company of their intention to participate in the meeting are entitled to attend it either personally or by proxy through a representative or substi-tute. Shareholders have the right to have matters addressed at the AGM if they have submitted a request to the Board no later than seven weeks before the AGM.
Annual General Meeting 2017The 2017 AGM was held on April 4 in Stockholm. A total of 1,107 shareholders were present, representing around 57.8 per-cent of the total number of votes. Among other matters, the meeting voted to re-elect Johan Karlström, Fredrik Lundberg, Charlotte Strömberg, Pär Boman, Jayne McGivern, John Carrig, Nina Linander and Hans Biörck as members of the Board and to elect Catherine Marcus as a new member. Hans Biörck was re-elected as Chairman of the Board. The employees were rep-resented on the Board by Richard Hörstedt, Lennart Karlsson and Gunnar Larsson as members, with Pär-Olow Johansson and Anders Rättgård as deputy members. All members and deputy members of the Board, as well as the company’s auditors and members of the Group Leadership Team, were present at the AGM. The AGM elected Ernst & Young AB as auditor, with Hamish Mabon as auditor in charge. The AGM also decided to approve a dividend to the shareholders of SEK 8.25 per share. The Board of Directors was authorized to acquire a maximum of 3,000,000 Series B shares in Skanska AB to ensure future share allotments to participants in Skanska’s employee owner-
1 This Corporate Governance Report for 2017 has been reviewed by the compa-ny’s external auditors in compliance with Chapter 9, Section 31 of the Swedish Companies Act. The report contains information as required by Chapter 6, Section 6 of the Annual Accounts Act.
Skanska Annual Report 201750 Corporate governance report
Governance structure
Compensation Committee
Project Review Committee
Shareholders/AGM
Board
Group staff units and support unit
President and CEO, Group Leadership Team
Infrastructure Development
Commercial Property Development
Residential Development
Construction
Nomination Committee
Auditors
Internal Audit and Compliance
Audit Committee
ship program (Seop) and on the transferal of a maximum of 763,000 Series B share in Skanska AB on Nasdaq Stockholm. These shares were acquired based on an earlier authorization to buy back treasury shares for the purpose of covering certain costs, primarily social insurance contributions, which may arise in connection with Skanska’s employee ownership programs. Complete information on the AGM and the minutes of the meeting are available on Skanska’s website. https://group.skanska.com/corporate-governance/annual-general-meeting/agm-archive/
Annual General Meeting 2018The next AGM for shareholders in Skanska AB will be held at 10:00 a.m. on April 13, 2018 at Stockholm Waterfront Congress Centre in Stockholm, Sweden.
The Nomination CommitteeThe 2013 AGM gave the Chairman of the Board a mandate, ahead of each AGM, to allow each of the four largest shareholders in terms of voting power to appoint a representative to join the Chairman on the Nomination Committee. In determining which are deemed to be the largest shareholders in terms of voting power, the list of shareholders registered with and categorized by Euro-clear Sweden AB as of the last business day in August is to be used.
The Nomination Committee’s mandate includes:
• evaluating the composition of the Board and its work;
• preparing proposals to submit to the AGM regarding the election of Board members and the Chairman of the Board;
• working with the company’s Audit Committee to prepare pro-posals to submit to the AGM regarding the election of auditors;
• preparing a proposal to submit to the AGM on fees for members of the Board to be divided between the Chairman and other members, and any compensation for committee work, and for auditors;
• preparing a proposal to submit to the AGM regarding a Chair-man for the AGM;
• where applicable, preparing a proposal on changes to the prin-ciples for appointing the next Nomination Committee.
On Skanska’s website there is information on how the shareholders can submit their own proposals to the Nomination Committeehttps://group.skanska.com/corporate-governance/annual-general-meeting/nomination-committee/.
Nomination Committee 2018 The Nomination Committee for the 2018 AGM has the fol-lowing composition: Helena Stjernholm, AB Industrivärden (23.9 percent of votes), Chairman of the Nomination Com-mittee, Mats Guldbrand, L E Lundbergföretagen AB (12.4 percent of votes), Bo Selling, Alecta (4.8 percent of votes), Lars-Åke Bokenberger, AMF (2.7 percent of votes) and Hans Biörck, Chairman of the Board, Skanska AB. This information was announced on Skanska’s website and published in a press release on October 2, 2017. According to the Code, the majority of the Nomination Committee’s members are to be independent in relation to the company and management and at least one member is also to be independent in relation to the largest shareholders in the company in terms of voting rights. All of the appointed mem-bers are independent in relation to the company and management and three are independent in relation to the largest shareholders in the company in terms of voting rights.
In preparation for the 2018 AGM the Nomination Committee held four meetings, at which minutes were kept, and maintained frequent contact between these meetings. No fees have been paid out for Nomination Committee duties. To perform its work, the Nomination Committee has taken part of the internal evaluation carried out of the Board’s work, the Chairman’s account of Board duties and the company’s strategy. The Committee has also inter-viewed individual members of the Board as well as members of the Group Leadership Team.
The Nomination Committee applies the rules on the compo-sition of the Board of Directors in accordance with the Code. The Nomination Committee has determined that the proposed members have a broad range of experience and complement each other’s skills. The independence requirement is also deemed to have been met. The Nomination Committee has also discussed the diversity requirement. In this regard the Nomination Committee has decided to apply as its diversity policy Chapter 4.1 of the Code, which states that Board members are to collectively exhibit diver-sity and breadth of qualifications, experience and background. A gender balance is also to be aimed for. In addition to the infor-mation already provided on the background and experience of the members of the Board, it has been determined that the proposed Board will consist of 4 women and 3 men. The gender balance is therefore 57 percent/ 43 percent, which, in the opinion of the Nomination Committee, is consistent with the gender balance requirement.
Skanska Annual Report 2017 51Corporate governance report
The Nomination Committee’s proposals, work report and supple-mentary information on proposed members of the Board is pub-lished in connection with the notice to attend the AGM and will also be presented to the 2018 AGM.
Board of DirectorsAccording to the Articles of Association, the Board of Directors is to consist of no fewer than five and no more than ten members with no more than three deputies, all of which are elected by the shareholders at each AGM. The Board of Directors has overall responsibility for Skanska’s organizational structure and man-agement and the Board’s main duty is to safeguard the interests of the company and the shareholders. The Board of Directors thus makes decisions regarding the Group’s strategy, interim and annual reports, major construction projects, investments and divestments, appointment of the President and CEO and matters concerning the organizational structure of the Group. The Chair-man leads the Board in its work and has regular contact with the President and CEO in order to stay informed about the Group’s activities and development.
In 2017 the Board of Directors consisted of nine members elected by the AGM, without deputies, plus three members and two deputy members appointed by the employees. According to the Code the majority of the Board’s AGM-elected members are to be independent in relation to the company and senior executives and at least two members are to also be independent in relation to the largest shareholder in the company. Eight of the Board members elected by the AGM are independent in relation to the company and its management. Of these, five members are also independent in relation to the company’s largest shareholders. The composition of the Board and an assessment of the independence of each mem-ber are presented in more detail on pages 58–59.
The work of the Board in 2017The work of the Board of Directors follows an annual agenda established in the Board’s Procedural Rules. In preparation for each Board meeting, the Board receives reports and documentation compiled according to established procedures. The purpose of this is to ensure that the Board has the relevant information and documentation on which to base decisions. In 2017 the Board held nine meetings, including its statutory meeting. The more impor-tant issues dealt with by the Board during the year included the appointment of a new CEO, updating and monitoring operations, review and approval of the interim reports and year-end report, writedowns on construction projects in Poland, the UK and USA Civil, restructuring of Construction operations, Infrastructure Development operations and the Group management structure, renewal of the Revolving Credit Facility (RCF), establishing an additional RCF with a green profile, internal control, risk manage-ment and compliance matters.
The Board’s committeesThe overall responsibility of the Board of Directors cannot be delegated, but the Board may appoint committees to do prepara-tory work and explore certain issues in preparation for decisions by the Board. Skanska’s Board has formed three committees to provide structure, improve efficiency and ensure the quality of its work (i) Audit Committee, (ii) Compensation Committee and (iii) Project Review Committee. The members of the committees are appointed annually at the statutory meeting of the Board. The Board’s Procedural Rules specify which duties and decision-making powers have been delegated. The committees report orally to the Board at each meeting and all minutes from these meetings are submitted to the Board.
The members and the deputy members of the Board
Member Position Born, year NationalityElected,
yearAudit
CommitteeCompensation
Committee
Project Review
Committee
Independent in relation to the Company and GLT
Independent in relation to major shareholders
Hans Biörck Chairman 1951 Sweden 2016 • • • Yes Yes
John Carrig Member 1952 USA 2014 • • • Yes Yes
Johan Karlström President and CEO 1 1957 Sweden 2008 • No Yes
Nina Linander Member 1959 Sweden 2014 • • Yes No
Fredrik Lundberg Member 1951 Sweden 2011 • Yes No
Charlotte Strömberg Member 1959 Sweden 2010 • • Yes Yes
Pär Boman Member 1961 Sweden 2015 • • • Yes No
Jayne McGivern Member 1960 UK 2015 • • Yes Yes
Catherine Marcus Member 2 1965 USA 2017 • Yes Yes
Richard Hörstedt Employee Representative 1963 Sweden 2007 • – –
Lennart Karlsson Employee Representative 3 1957 Sweden 2016 – –
Gunnar Larsson Employee Representative 1953 Sweden 2014 – –
Pär-Olow Johansson Employee Representative (Deputy) 1954 Sweden 2014 – –
Anders Rättgård Employee Representative (Deputy) 2 1961 Sweden 2017 – –
• = Chairman • = Member
1 Until December 31, 2017.2 From April 4, 2017.3 Until January 18, 2018.
Skanska Annual Report 201752 Corporate governance report
Audit CommitteeThe main task of the Audit Committee is to assist the Board in overseeing of financial reporting, reporting procedures and accounting principles, and to monitor the auditing of the accounts for the Parent Company and the Group. The Committee also evaluates the quality of the Group’s reporting, internal auditing and risk management, and reviews the reports and opinions of the company’s external auditors. The Committee monitors the external auditors’ assessment of their impartiality and independence, and that there are routines in place stipulating which non-audit services they provide to the Parent Company and the Group. The Committee also monitors compliance with the rules on auditor rotation. The external auditors are present at all Audit Committee meetings. At least once a year the Audit Committee meets the auditors without senior executives being present.
In 2017 the Audit Committee consisted of Charlotte Strömberg (Chairman), Hans Biörck, John Carrig, Nina Linander and Pär Boman.
The Committee held six meetings in 2017. Important matters addressed during the year included capital allocation, financ-ing, pension reporting, external reporting, implementation of the Enterprise Resource Planning (ERP) systems, IT strategy and security, impairment testing, writedowns on construction projects in Poland, the UK and USA Civil, larger disputes, review of the interim reports and year-end report, risk management and com-pliance matters.
Compensation CommitteeThe main task of the Compensation Committee is to prepare recommendations for board decisions on the appointment of the President and CEO, including salary and other compensation, and other Group Leadership Team members, including compensa-tion, pension and employment terms for these individuals. The Committee prepares recommendations for board decisions on incentive programs, and examines the outcomes of variable salary components.
In 2017 the Compensation Committee consisted of Hans Biörck (Chairman), John Carrig, Jayne McGivern and Pär Boman. The Code requirements regarding independence, according to which the Chairman of the Board is permitted to be the Chairman of the Compensation Committee and other AGM-elected members are to be independent in relation to the company and the Group Lead-ership Team, have therefore been met.
The Committee held seven meetings in 2017. Important mat-ters addressed during the year was appointment of a new CEO, review of executives’ other assignments, review of Skanska’s vari-able remuneration programs for the Group Leadership Team, and review and evaluation of the application of the principles for remuneration to senior executives as well as the existing remu-neration structure and remuneration levels.
Project Review CommitteeThe Project Review Committee makes decisions on individual projects within the Construction, Commercial Property Develop-ment and Residential Development business steams, investments and divestments within Infrastructure Development and certain project financing packages. Projects that involve especially high or unusual risks or other special circumstances may be referred to the Board for a decision. The Committee consists of all AGM-elected members and employee representative Richard Hörstedt. The Committee held eleven meetings in 2017.
Evaluation of the work of the BoardThe work of the Board is evaluated annually through a structured process aimed at improving work processes, efficiency and collec-tive expertise, and to assess any need for change. The Chairman of the Board is responsible for the evaluation and for presenting the findings to the Board and the Nomination Committee. In 2017 an evaluation was carried out in the form of a questionnaire and individual conversations between the Chairman and each member of the Board, but also through discussion during board meetings. The Chairman was also evaluated through a written questionnaire; the board meeting on this occasion was chaired by another member appointed for the purpose. The outcome of the 2017 evaluation was that the work of the Board was deemed to be functioning well.
Fees to the BoardTotal fees to the AGM-elected Board members were approved by the 2017 AGM in the amount of SEK 9,715,000. The Chairman of the Board received SEK 2,040,000 in fees and other Board mem-bers who are not employed by the Group received SEK 680,000 each. The Chairman of the Audit Committee received SEK 220,000 and the other members of the Committee received SEK 157,500. The Chairman of the Compensation Committee received SEK 110,000 and the other members SEK 105,000. The Chairman of the Project Review Committee received SEK 205,000 as did each of the other members, who are not employed by the Group. For more detailed information, see Note 37, “Remuneration to senior executives and Board members.”
Attendance at the Board and Committee meetings
Board meetings
Audit Committee
Compensation Committee
Project Review Committee
Number of meetings 9 6 7 11
Member
Hans Biörck 9 6 7 11
Johan Karlström 1 9 10
Fredrik Lundberg 9 11
Nina Linander 9 6 11
John Carrig 9 6 7 11
Charlotte Strömberg 9 6 10
Pär Boman 9 6 6 11
Jayne McGivern 9 7 10
Catherine Marcus 2 8 9
Gunnar Larsson 9
Richard Hörstedt 9 11
Lennart Karlsson 3 7
Pär-Olow Johansson 9
Anders Rättgård 2 8
1 Until December 31, 2017.2 From April 4, 2017.3 Until January 18, 2018.
Skanska Annual Report 2017 53Corporate governance report
Operational management and internal controlThe President and CEO and the Group Leadership TeamThe President and CEO is appointed by the Board of Directors and runs the company in accordance with the instructions adopted by the Board. The President and CEO is responsible for the day-do-day management of the operations of the company and the Group. The work of the President and CEO is evaluated at one board meeting each year at which no senior executives are present. On September 13, 2017 Skanska announced in a press release that Johan Karlström had informed the Board that he wished to retire from his position as CEO. He will continue to serve as a senior advisor until January 2019. On December 7, 2017, Skanska announced that the Board of Directors had appointed Anders Danielsson as the new President and CEO. Anders Danielsson started the position as the new President and CEO on January 1, 2018, when Johan Karlström left his position. The President and CEO has no business dealings of any significance with Skanska AB or its Group companies.
The President and CEO and the Executive Vice Presidents form the Group Leadership Team.
In alignment with the strategic review in 2017, Skanska is under-taking a comprehensive restructuring of the business, primarily in the Construction stream, to improve profitability. Effective as of
January 17, 2018, a new Group Leadership Team in a new structure replaced the former Senior Executive Team, in order to strengthen the units’ performance.
Information on the President and CEO and the members of the Group Leadership Team can be found on pages 56–57.
Group Staff Units and Support unitGroup Staff Units and the Support unit, Skanska Financial Ser-vices AB, are based at the Group headquarters in Stockholm. The Group Staff Units and Support units assist the President and CEO and the Group Leadership Team on matters relating to corporate functions, coordination and oversight. They also provide support to the business units. The head of each Group Staff Unit reports directly to a member of the Group Leadership Team. The head of the Internal Audit and Compliance unit reports directly to the Board by way of the Audit Committee. A presentation of the Group Staff Units and the Support unit can be found on page 57.
The Business Units and their governanceThe Skanska Group has a decentralized structure characterized by a large measure of delegation of authority and responsibility to the Business Units. Each Business Unit is headed by a president and has its own administrative departments and other resources in
Skanska’s management structureGroup Leadership Team, from 17 January, 2018
Business Unit/Operating Unit
Group Staff Unit/Support Unit
Reporting Skanska InfrastructureDevelopment
SafetyInternal Audit & Compliance
Skanska USA Civil
Skanska FinancialServices
Skanska CommercialProperty Development Nordic
Skanska CommercialProperty Development Europe
Skanska CommercialProperty Development USA
Ethics Skanska Norway
Skanska Poland
Human Resources
Skanska USA Building
Investor Relations
Risk Management
Information Technology
Skanska Residential Development Europe
BoKlok Housing
Market Making
Legal Affairs Skanska Finland
Skanska Czech Republic and Slovakia
Controlling
Green & Community Investment
Skanska Sweden
Skanska UK
Communications
Operational Efficiency
◀ ◀ ◀ ◀◀
◀
◀
◀
◀
◀
◀
◀
◀
Kirsi MettäläEVP, Human Resources
Claes LarssonEVP
Magnus Persson
EVP, CFORichard KennedyEVP
Caroline Fellenius-OmnellEVP, General Counsel
Anders DanielssonPresident and CEO
Skanska Annual Report 201754 Corporate governance report
Skanska reporting structure
Operational units ConstructionResidential Development
Commercial Property Development
Infrastructure Development
Sweden
Norway
Finland
Commercial Property
Development Nordic
Czech Republic
and Slovakia
Poland
United Kingdom
Commercial Property
Development Europe
Residential Development
Europe
USA Civil
USA Building
Commercial Property
Development USA
Infrastructure Development
Business stream
Operatingunit
External Reporting
order to conduct its operations effectively. Aside from day-to-day operations managing projects, the Business Units deal with mat-ters such as their strategic development, business plans, invest-ments, divestments and organization.
In addition to the Board’s governing documents, the Group Leadership Team has adopted policies and guidelines for the Group. These policies and guidelines are updated regularly to reflect changes in operations or new regulations. The Board’s Pro-cedural Rules state which items of business will be decided upon by the Board of Skanska AB, by the President and CEO/Group Leadership Team or at the Business Unit level. The thresholds for decision authority stipulated in the Procedural Rules are further broken down in the Business Units’ own rules on decision author-ity. The Business Units provide regular, systematic feedback to the Group Leadership Team on compliance with the more impor-tant governing documents, such as the Risk Management Policy, Financial Policy, Information Policy and the Code of Conduct. Risk management follows a structured process in which the deci-sion-making body depends, among other things, on the size, type and geographic location of the projects/assignments.
Remuneration to senior executivesThe 2017 AGM approved principles for salaries and other remu-neration to senior executives. These are described on page 160. Information about salaries and other remuneration to the Presi-dent and CEO and other members of the Group Leadership Team,
as well as outstanding share award and share-related incentive programs are found in Note 37.
The company’s auditorsAccording to the Articles of Association, the AGM is to elect one or two authorized public accountants and no more than two deputy auditors. Registered accounting firms may also be appointed as the company’s auditor. The auditors have attended two board meetings to report on the auditing process of Ernst & Young AB for Skanska and to provide the members of the Board with an opportunity to ask questions without management being present. The auditors have also attended all meetings of the Board’s Audit Committee. For information on fees and other remuneration to the accounting firm, see the table below and Note 38.
Fees and other remuneration to auditors
Ernst & Young KPMG
SEK M 2017 2016 2017 2016
Audit assignments 49 46 – 8
Audit-related activities besides the annual audit assignment 5 0 – –
Tax advisory services 1 3 – 1
Other services 3 1 – 2
Total 58 50 – 11
Skanska Annual Report 2017 55Corporate governance report
Internal control This description includes the most important elements of the company’s internal control and risk management systems in con-nection with financial reporting.
Control environmentThe Board of Directors has overall responsibility for ensuring that Skanska has effective and adequate risk management and internal control. The purpose is to provide a reasonable assurance that the operations are run appropriately and efficiently, that external reporting is reliable and that laws and internal rules are complied with. The Board’s Procedural Rules and instructions for the CEO and Board Committees ensure a clear division of roles and respon-sibilities for the purpose of ensuring effective management of business risk. The Board has also adopted a number of fundamen-tal rules of importance for internal control work, such as the com-pany’s Risk Management Policy, Financial Policy, Information Policy and Code of Conduct. The Group Leadership Team reports regularly to the Board according to established routines. The Audit Committee also presents reports on its work. The Group Leadership Team is responsible for the system of internal controls required to manage material operational risks. This includes providing instructions to people in various positions in order to maintain good internal control.
Risk assessment and control activitiesSkanska has identified the material risks in its operations that may, if not managed correctly, lead to errors in financial reporting and/or have an impact on the company’s performance results. The company has subsequently ensured that the Group has rules in place to guarantee that these risks are managed. The Group Lead-ership Team and the corporate departments are responsible for managing general risks relating to strategy, macroeconomics and regulatory frameworks, while the main tasks relating to opera-tional risks and opportunities are carried out at the local level within the Business Units.
Risks and opportunities for improvement are both greatest during the actual execution phase of the projects, and thus the work focuses heavily on this phase. Since almost every project is unique, risks and opportunities must be analyzed with respect to project type, location, execution phase and client.
Skanska uses a Group-wide procedure for identifying and man-aging risks associated with construction contracts, projects and investments. A specialized Group Staff Unit, the Skanska Risk Team, examines and analyzes projects and investments above a certain size. The proposals are then processed by the Skanska Risk Team, which issues a recommendation. The final decision on ten-
ders, investments or divestments is made by the Group Leadership Tender Board which consists of the Group Leadership Team and in certain cases, by the Project Review Committee.The company considers the greatest risks that the Group faces to be the following: •Loss or lack of key individuals•Ethical breaches•Project or investment losses•Macro-financial instability •Accidents with multiple people affected
A more detailed description of the risks and how they are man-aged is found on pages 16–18.
Information and communicationSignificant accounting principles, manuals and other documents of importance in financial reporting are updated and information on them is communicated regularly. There are several information channels to the Group Leadership Team and the Board of Direc-tors for important information. For its external communication, the Group has an Information Policy to ensure that the company meets the existing regulations for providing the market with accu-rate information.
MonitoringThe Board of Directors continually evaluates the information provided by the Group Leadership Team and the Audit Committee. Of particular importance is the result of the Audit Committee’s work on monitoring the effectiveness of the Group Leadership Team’s internal control processes. This includes ensuring that steps are taken to address the shortcomings revealed in internal and external audits and to implement the proposed actions.
Internal Audit and ComplianceThe Internal Audit and Compliance Group Staff Unit is respon-sible for monitoring and evaluating risk management and internal control processes. The unit’s work is planned in consultation with the Audit Committee and reporting takes place directly to the Board through the Committee. Matters relating to the internal audit are also communicated on an ongoing basis to Skanska’s external auditors. In 2017 the Internal Audit and Compliance unit focused on reviewing the risks identified relating to the company’s projects, business critical processes and key corporate depart-ments. A total of some 120 audits were conducted during the year within all business units. There was a particular focus on the busi-ness operations in the USA and central Europe. The audits were performed in accordance with a uniform audit method.
Skanska Annual Report 201756 Group Leadership Team
Group Leadership Team
Anders Danielsson Caroline Fellenius-Omnell Richard Kennedy
Position President and Chief Executive Officer
Executive Vice President, General Counsel
Executive Vice President
Responsible for Business Units– Skanska Finland– Skanska Norway– Skanska Sweden– Skanska Czech Republic
and Slovakia– Skanska Poland– Skanska UK
Responsible for Group Staff Units– Legal Affairs– Ethics– Green & Community Investment
Reponsible for Business Units/Group Staff Units– Skanska USA Building– Skanska USA Civil– Skanska Infrastructure
Development– Safety
Born 1966 1968 1966
Joined Skanska in
1991 2017 2004
Shareholding in Skanska, December 31, 2017
86,924 B-shares 1,552 B-shares 29,593 B-shares
Board assignments
– – – ACE Mentor Program, NY, USA– Building Trades Employers
Association, NY, USA
Education – M.Sc. Engineering, Royal Institute of Technology, Stockholm
– Advanced Management Program, Harvard, Boston, MA, USA
– Master of Laws, Stockholm University
– Master of Laws, College of Europe, Brügge, Belgium
– Bachelor of Arts, Rutgers College, Rutgers University
– Juris Doctor, Seton Hall University School of Law
– Master of Laws, London School of Economics and Political Science
Work experience
– Executive Vice President, Skanska AB
– President, Skanska Sweden– President, Skanska Norway
– Group General Counsel, Tele2 AB– Group General Counsel, Sidel– General Counsel Europe,
Tetra Pak AB– Corporate Counsel,
AB Electrolux
– President and CEO, Skanska USA Building
– Chief Operating Officer, Skanska USA Building
– General Counsel, Skanska USA Building
New Group Leadership Team as of January 17, 2018
Skanska announced a new Group Leadership Team (GLT), effective as of January 17, 2018, which will replace the former Senior Executive Team (SET). The Business Unit Presidents will be members of an Extended Leadership Team.
Members who have left the former SET
– Richard Cavallaro– Johan Karlström– Pierre Olofsson– Veronica Rörsgård– Peter Wallin– Mats Williamson– Christel Åkerman
Presidents of Business Units
Gunnar Hagman Skanska Sweden
Ståle Rød Skanska Norway
Tuomas Särkilahti Skanska Finland
Magnus Persson Skanska Poland
Michal Jurka Skanska Czech Republic and Slovakia
Greg Craig Skanska UK
Paul Hewins Skanska USA Building
Richard Cavallaro Skanska USA Civil
Jonas Spangenberg BoKlok Housing
Mikael Matts Skanska Residential Development Europe
Jan Odelstam Skanska Commercial Property Development Nordic
Katarzyna Zawodna Skanska Commercial Property Development Europe
Robert Ward Skanska Commercial Property Development USA
Johan Henriksson Skanska Infrastructure Development
Skanska Annual Report 2017 57Group Leadership Team
Claes Larsson Kirsi Mettälä Magnus Persson
Executive Vice President Executive Vice President, Human Resources
Executive Vice President, Chief Financial Officer
Responsible for Business Units/Group Staff Units– Skanska Commercial Property
Development Europe– Skanska Commercial Property
Development Nordic– Skanska Commercial Property
Development USA– Residential Development Europe– BoKlok Housing– Market Making
Responsible for Group Staff Units– Human Resources
Responsible for Group Staff Units/ Support Unit– Controlling– Reporting– Internal Audit and Compliance– Investor Relations– Risk Managment– Skanska Financial Services– IT
1965 1963 1976
1990 1994 2006
151,182 B-shares 13,902 B-shares 5,872 B-shares
– Chairman , Handelsbanken’s regional bank board of directors, western Sweden
– Board member, Helsinki Region Chamber of Commerce
– Vice Chairman, FIBS Finnish Business Society
–
– M.Sc. Engineering, Chalmers University of Technology, Gothenburg
– MBA, Chalmers University of Technology and Göteborg University
– Bachelor of Business Administra-tion, Haaga-Helia University of Applied Sciences
– eMBA, Aalto Executive Education
– Ph.D. in Business Economics, Uppsala University
– Master of Science in Business Economics, Uppsala University
– President, Skanska Commercial Property Development Nordic
– President, Skanska Fastigheter Göteborg
– Senior Vice President, HR and Communications Skanska Finland
– Senior Vice President, HR devel-opment, BU Skanska Finland
– HRD manager, Skanska Finland– HR specialist, Skanska Finland
– Chief Financial Officer, Skanska Sweden
– Senior Vice President, Investor Relations, Skanska AB
– Group Manager, Corporate Finance, Skanska AB
– Head of Research & Analysis, Skanska Financial Services
President of Support Unit
Therese Tegner Skanska Financial Services
Senior Vice Presidents, Group Staff Units
George Fadool Ethics
Katarina Bylund Reporting
Karolina Cederhage Communications
Anders Göransson Internal Audit & Compliance
Caroline Walméus Controlling
Jarosław Urbańczyk Information Technology (IT)
Neil Moore Safety
Lena Hök Green & Community Investment
André Löfgren Investor Relations
Mark Lemon Risk Management
Roger Bayliss Operational Efficiency
Larry Casey Market Making
Skanska Annual Report 201758 Board of Directors
Richard HörstedtBorn: Helsingborg, 1963Swedish Building Workers’ Union, appointed 2007Board member
Shareholding in Skanska0 shares
Pär-Olow JohanssonBorn: Stockholm, 1954Region Hus Stockholm NordByggnads, appointed 2014Deputy Board member
Shareholding in Skanska3,392 B-shares
Hans Biörck Pär Boman John Carrig Nina Linander Fredrik Lundberg Catherine Marcus Jayne McGivern Charlotte Strömberg
Position Chairman Board member Board member Board member Board member Board member Board member Board member
Born Sweden, 1951 Sweden, 1961 USA, 1952 Sweden, 1959 Sweden, 1951 USA, 1965 United Kingdom, 1960 Sweden, 1959
Elected 2016 2015 2014 2014 2011 2017 2015 2010
Shareholding in Skanska, December 31, 2017
20,273 B shares666 B shares related person
1,000 B shares 8,000 B shares 3,000 B shares 2,600 B shares related persons
6,032,000 A-shares and 11,550,000 B-shares through L E Lundbergföretagen AB (publ)5,376 A-shares and 2,100,000 B-shares privately
0 shares 0 shares 7,000 B shares900 B shares related person
Other Boardassignments
– Board member, Trelleborg AB, – Board member, Bure Equity AB– Board member, Henry Dunkers
Stiftelse– Board member, Crescit Asset
Management AB
– Chairman, Svenska Handelsbanken AB
– Vice Chairman, AB Industrivärden
– Chairman, Svenska Cellulosa Aktiebolag, SCA
– Chairman, Essity AB
– Board member and Chair of the Nominating and Governance Committee, Forum Energy Technologies Inc.
– Board member, WPX Energy Inc.
– Board member, Alley Theatre in Houston
– Board member, The British American Foundation of Texas
– Board member, Jones Graduate School of Business, Rice University
– Board member Telia Company AB– Chairman, Awa Holding AB, – Board member, AB Industri-
värden– Board member, Castellum AB – Board member, OneMed AB
– Chairman, AB Industrivärden, – Chairman, Holmen AB – Chairman, Hufvudstaden AB– Chairman, Indutrade AB– Vice Chairman, Svenska
Handelsbanken AB– Board member, L E Lundberg-
företagen AB
– NCREIF PREA Reporting Standards Board (Private)
– Chair of Defence Infra-structure Organisation (Ministry of Defence)
– Senior Advisor to Madison Square Garden plc on Devel-opment and Construction
– Board member, Bonnier Holding AB
– Chairman, Castellum AB – Board member,
Clas Ohlson AB– Board member, Ratos AB – Board member, Sofina S.A. – Member, The Swedish
Securities Council
Education – Master of Science in Business and Economics, Stockholm School of Economics
– Degree in engineering and in economics. Doctor H.C. Umeå School of Business, Economics and Statistics
– Law Degree, Temple University, Philadelphia
– Advanced degree in Tax Law, New York University School of Law
– MBA, IMEDE, Switzerland– Master of Science in Business and
Economics, Stockholm School of Economics
– M.Sc. Engineering, Royal Insti-tute of Technology, Stockholm
– MBA, Stockholm School of Economics
– Dr. (Econ.) h.c., Stockholm School of Economics
– Dr. (Eng.) h.c., Linköping University
– M.S., Real Estate Investment and Development, New York University
– B.S.E. Real Estate Finance and Entrepreneurial Man-agement, Wharton School, University of Pennsylvania
– Harrogate Ladies College– Fellow of the Royal Institution
of Chartered Surveyors
– MBA, Stockholm School of Economics
Workexperience
– Chief Financial Officer, Skanska AB
– Chief Financial Officer, Autoliv AB
– Chief Financial Officer, Esselte AB
– President and CEO, Svenska Handelsbanken AB
– Chief Operating Officer, ConocoPhilips
– Head of Product Area Electricity, Vattenfall AB
– Senior Vice President, Head of Staff Unit Finance, AB Electrolux
– Partner, Stanton Chase International AB
– President and CEO, L E Lundbergföretagen AB
– Global Chief Operating Office, PGIM Real Estate
– MBL Life Assurance Corporation
– The Related Companies– Integrated Resources
– Red Grouse Properties– Chief Executive Officer, Multi-
plex plc (Europe)– Managing Director UK,
Anschutz Entertainment Group
– Group Development Director, MWB Group Holdings plc,
– Divisional Managing Director, Redrow plc.
– Senior Project and Account Manager, Alfred Berg, ABN AMRO, Stockholm
– Head of Investment Banking, Carnegie Investment Bank
– President, Jones Lang LaSalle Norden
Dependency relation-ship in accordance with Code of Corporate Governance
– Independent in relation to company and company management
– Independent in relation to major shareholders
– Independent in relation to company and company management
– Dependent in relation to major shareholders
– Independent in relation to company and company management
– Independent in relation to major shareholders
– Independent in relation to company and company management
– Dependent in relation to major shareholders
– Independent in relation to company and company management
– Dependent in relation to major shareholders
– Independent in relation to company and company management
– Independent in relation to major shareholders
– Independent in relation to company and company management
– Independent in relation to major shareholders
– Independent in relation to company and company management
– Independent in relation to major shareholders
Board of Directors
Skanska Annual Report 2017 59Board of Directors
AuditorsErnst & Young ABAuditor in charge since 2016:Hamish Mabon,Stockholm,born 1965. Authorized public accountant.
Gunnar LarssonBorn: Kalix, 1953Asfalt och Betong NorrLedarna, appointed 2014Board member
Shareholding in Skanska3,448 B-shares
Anders RättgårdBorn: Holmestad, 1961Unionen, appointed 2017Deputy Board member
Shareholding in Skanska4,173 shares
Hans Biörck Pär Boman John Carrig Nina Linander Fredrik Lundberg Catherine Marcus Jayne McGivern Charlotte Strömberg
Position Chairman Board member Board member Board member Board member Board member Board member Board member
Born Sweden, 1951 Sweden, 1961 USA, 1952 Sweden, 1959 Sweden, 1951 USA, 1965 United Kingdom, 1960 Sweden, 1959
Elected 2016 2015 2014 2014 2011 2017 2015 2010
Shareholding in Skanska, December 31, 2017
20,273 B shares666 B shares related person
1,000 B shares 8,000 B shares 3,000 B shares 2,600 B shares related persons
6,032,000 A-shares and 11,550,000 B-shares through L E Lundbergföretagen AB (publ)5,376 A-shares and 2,100,000 B-shares privately
0 shares 0 shares 7,000 B shares900 B shares related person
Other Boardassignments
– Board member, Trelleborg AB, – Board member, Bure Equity AB– Board member, Henry Dunkers
Stiftelse– Board member, Crescit Asset
Management AB
– Chairman, Svenska Handelsbanken AB
– Vice Chairman, AB Industrivärden
– Chairman, Svenska Cellulosa Aktiebolag, SCA
– Chairman, Essity AB
– Board member and Chair of the Nominating and Governance Committee, Forum Energy Technologies Inc.
– Board member, WPX Energy Inc.
– Board member, Alley Theatre in Houston
– Board member, The British American Foundation of Texas
– Board member, Jones Graduate School of Business, Rice University
– Board member Telia Company AB– Chairman, Awa Holding AB, – Board member, AB Industri-
värden– Board member, Castellum AB – Board member, OneMed AB
– Chairman, AB Industrivärden, – Chairman, Holmen AB – Chairman, Hufvudstaden AB– Chairman, Indutrade AB– Vice Chairman, Svenska
Handelsbanken AB– Board member, L E Lundberg-
företagen AB
– NCREIF PREA Reporting Standards Board (Private)
– Chair of Defence Infra-structure Organisation (Ministry of Defence)
– Senior Advisor to Madison Square Garden plc on Devel-opment and Construction
– Board member, Bonnier Holding AB
– Chairman, Castellum AB – Board member,
Clas Ohlson AB– Board member, Ratos AB – Board member, Sofina S.A. – Member, The Swedish
Securities Council
Education – Master of Science in Business and Economics, Stockholm School of Economics
– Degree in engineering and in economics. Doctor H.C. Umeå School of Business, Economics and Statistics
– Law Degree, Temple University, Philadelphia
– Advanced degree in Tax Law, New York University School of Law
– MBA, IMEDE, Switzerland– Master of Science in Business and
Economics, Stockholm School of Economics
– M.Sc. Engineering, Royal Insti-tute of Technology, Stockholm
– MBA, Stockholm School of Economics
– Dr. (Econ.) h.c., Stockholm School of Economics
– Dr. (Eng.) h.c., Linköping University
– M.S., Real Estate Investment and Development, New York University
– B.S.E. Real Estate Finance and Entrepreneurial Man-agement, Wharton School, University of Pennsylvania
– Harrogate Ladies College– Fellow of the Royal Institution
of Chartered Surveyors
– MBA, Stockholm School of Economics
Workexperience
– Chief Financial Officer, Skanska AB
– Chief Financial Officer, Autoliv AB
– Chief Financial Officer, Esselte AB
– President and CEO, Svenska Handelsbanken AB
– Chief Operating Officer, ConocoPhilips
– Head of Product Area Electricity, Vattenfall AB
– Senior Vice President, Head of Staff Unit Finance, AB Electrolux
– Partner, Stanton Chase International AB
– President and CEO, L E Lundbergföretagen AB
– Global Chief Operating Office, PGIM Real Estate
– MBL Life Assurance Corporation
– The Related Companies– Integrated Resources
– Red Grouse Properties– Chief Executive Officer, Multi-
plex plc (Europe)– Managing Director UK,
Anschutz Entertainment Group
– Group Development Director, MWB Group Holdings plc,
– Divisional Managing Director, Redrow plc.
– Senior Project and Account Manager, Alfred Berg, ABN AMRO, Stockholm
– Head of Investment Banking, Carnegie Investment Bank
– President, Jones Lang LaSalle Norden
Dependency relation-ship in accordance with Code of Corporate Governance
– Independent in relation to company and company management
– Independent in relation to major shareholders
– Independent in relation to company and company management
– Dependent in relation to major shareholders
– Independent in relation to company and company management
– Independent in relation to major shareholders
– Independent in relation to company and company management
– Dependent in relation to major shareholders
– Independent in relation to company and company management
– Dependent in relation to major shareholders
– Independent in relation to company and company management
– Independent in relation to major shareholders
– Independent in relation to company and company management
– Independent in relation to major shareholders
– Independent in relation to company and company management
– Independent in relation to major shareholders
Skanska Annual Report 201760 xxxxxxxx
Tunneling a faster connection through downtown Los Angeles
Regional Connector, Los Angeles, USA
Construction
In Los Angeles, the car is not just a mode of transportation – it’s a way of life.
But faced with very challenging traffic congestion, LA is doubling the size of its
rail transit network, with Skanska as an important partner.
Perhaps the most transformational rail project is the Regional Connector,
which will link three separate rail lines to streamline travel through downtown.
Under a SEK 9 billion design-build contract, of which Skanska has a 62.5 percent
share, the Group’s joint venture is delivering 3 kilometers of double-track subway
with three new stations.
Throughout 2017, a massive tunnel-boring machine snaked below the city,
precisely guided by a wireless sensor system. The route was carefully chosen to
avoid utilities, foundations and other underground obstacles. Boring concluded
in early 2018, with a late 2021 completion targeted for the entire project.
Skanska Annual Report 2017 61Report of the Directors
Report of the Directors
Report of the Directors 62
Sustainability report 70
Consolidated income statement 87
Consolidated statement of comprehensive income 88
Consolidated statement of financial position 89
Consolidated statement of changes in equity 91
Consolidated cash flow statement 92
Parent Company income statement 94
Parent Company balance sheet 95
Parent Company statement of changes in equity 96
Parent Company cash flow statement 97
Notes, table of contents 98
Auditor’s Report 183
Independent practitioner’s review report on
Skanska AB’s greenhouse gas reporting 187
Skanska Annual Report 201762 Report of the Directors
The Board of Directors and the President of Skanska AB (publ) hereby submit their report on the operations of both the company and the Group in 2017.
Revenue increased both in Swedish kronor and in local currencies, while operating income fell both in Swedish kronor and in local currencies compared to the previous year. The overall profitability in Construction was weak and the operating income was affected by impairment of goodwill and other tangible and intangible assets of about SEK 1.0 billion relating to the restructuring of Business Units within Construction in Europe and USA, and project write downs of about SEK 1.5 billion, also in the Construction business stream. Project write downs were caused by delayed projects, a slower than expected pace of production as well as design changes from clients in the UK and USA as well as cost increases and client claims, primarily relating to completed projects in Poland. Con-struction operations in the Nordic region remained strong in 2017, especially in Sweden. Skanska intends to scale down operations at Business Units with sustained low profitability or that are no longer of strategic importance, and increase the focus on cost control and risk management. Skanska intends to restructure the construction unit in Poland. In USA Skanska will exit the power sector and in the UK the focus will be on the core business. Finally, the operations in the Czech Republic will be adapted to tougher market conditions. Order bookings were strong, with USA and the Nordic countries having higher order bookings than revenue in 2017. The order back-log at the end of the year amounted to SEK 188.4 billion, which is equivalent to 15 months of production.
The Residential Development business stream continued to show improved profitability compared to the previous year and was strong in Sweden and Norway in particular. Despite slowing in the Swedish market, demand for Skanska’s homes in the affordable and core segment was good. In Stockholm and Oslo, Skanska noted that customers were more cautious in their purchasing decisions, while other markets in the Nordic region and Europe remained stable. The number of speculative buyers in Sweden fell as a consequence of new regulations. This increased stability in the market.
Commercial Property Development also had a very active and profitable year in all three markets: Nordic, Central Europe and USA, and sold 24 properties in 2017, for a total of SEK 10.9 billion, generating capital gains of about SEK 2.9 billion, based on segment reporting. In addition, three projects developed in joint ventures were sold for a sales gain of SEK 0.6 billion. At the end of the year Commercial Property Development had 46 projects in progress. Skanska leased out 477,000 sq m during the year. Leasing is an important factor in the company’s ability to realize surplus value generated in future years.
The Infrastructure Development business stream sold its invest-ment in the A1 motorway in Poland during the year as well as Skanska’s share of two wind power projects in Sweden. Due to a weak European market, the Infrastructure Development business stream will be concentrating on the US market in the future. The priority will be to bid selectively on new projects and complete existing ones.
ConstructionThe market outlook for Construction remains positive. The market for building construction and civil construction projects in Sweden is very strong, although competition is significant. The residential construction market is slowing slightly. In Norway the outlook for the civil project market remains good, although there is significant competition for new bids. The building construction market is also
benefiting from increased public investment, while the residential construction market is stable except in certain regions that are dependent on the power sector. In Finland the market is improving continously. The result of the EU referendum is still having a nega-tive impact on the commercial building construction market in the UK. In Central Europe the market is relatively stable, although there is significant competition for building projects in the Czech Republic. In USA the market in general is strong. The civil con-struction market remains good, although competition is intense. In building construction, the markets for airports, education, data centers, healthcare and life sciences are strong.
Residential DevelopmentThe residential market for the segments on which Skanska is focusing has slowed down to a more stable level in Sweden. The Norwegian market remains strong, although uncertainty has increased. Customers in both of these markets are showing signs of being more cautious in their purchasing decisions. The Finnish market is improving steadily and the Central European market is good. Common to all home markets are the difficulties in acquiring and developing land due to high prices and long planning processes. In 2017, 4,285 units (4,603) were sold and 4,318 units (4,848) were started, of which BoKlok sold 1,195 homes (1,211) and started 1,257 (1,176). BoKlok is a joint concept of Skanska and Ikea for affordable homes based on standardized modules. At the end of the year there were 7,243 units (7,421) in production and 76 percent (77) of these had been sold.
Commercial Property DevelopmentDemand for modern and efficient premises is strong. There is a bal-ance between demand and supply in the Nordic and Central Euro-pean markets, providing a stable vacancy rate. The vacancy rates are low in Sweden and rents are increasing. Demand for office space is strong in Poland and is improving in other parts of Central Europe. In USA, demand from tenants continues to improve in Washington D.C., and remains strong in Boston and Seattle, while demand in Houston’s energy corridor is weaker due to low oil prices. Modern properties with long-term tenants are in high demand among prop-erty investors, resulting in attractive valuations for these properties. Investor interest remains strong in USA, Central Europe and the Nordic region , particularly Sweden. Common to all of Skanska’s home markets are difficulties in acquiring and developing land due to high prices and long planning processes. During the year a total of 24 projects were started across all markets: USA, Central Europe and the Nordic region. At the end of the year a total of 46 projects were in progress. 477,000 sq m were leased during the year.
Infrastructure DevelopmentThe market for public-private partnership (PPP) projects is strong in USA although competition is significant. In the other markets the prospects for new PPP projects are limited, although there are some opportunities in the Nowegian market. At the end of the year the net present value of the projects was SEK 3.0 billion (4.3).
Skanska Annual Report 2017 63Report of the Directors
Order bookings and order backlog
Construction order bookings, order backlog and revenue
Order bookingsThe order bookings decreased in both local currencies and Swedish kronor by 11 percent compared to the previous year, amounting to SEK 151.8 billion (170.2). Order bookings in SEK were 1 percent higher than revenue in 2017. This can be compared to the previous year when order bookings were 23 percent higher than revenue. Order bookings were good across the board, but were particularly strong for the US operations. Of the contracts signed in 2017 a num-ber of substantial ones in segments that are important to Skanska are mentioned below.
NordicsSweden received a number of substantial orders, the largest being a contract with Locum for the reconstruction and extension of Saint Göran Hospital in Stockholm with an order value of around SEK 1.3 billion. Skanska Sweden signed a contract with AMF Fastig heter to build a new building for retail and office space in Stockholm, with an order value of around SEK 1.2 billion. Skanska Sweden also signed a contract with Västfastigheter for a new medical building at Kungälv Hospital with an order value of around SEK 940 M. In Norway, Skanska signed a contract with the Norwegian Public Roads Administration for construction of the E6 route in southern Helgeland with an order value of around SEK 2.4 billion. Skanska Norway and the Cura Group signed a con-tract with Sykehuset i Vestfold HF for an extension at the hospital in Vestfold. The contract is worth around SEK 1 billion and will be executed by Skanska Norway (70 percent) in cooperation with Skanska UK (30 percent). In Finland, Skanska signed an agreement with the city of Helsinki to renovate its Olympic stadium for an order value of around SEK 1.5 billion.
EuropeSeveral substantial orders were received in the UK in 2017. Skanska signed a contract with Consolidated Development to construct the St Giles Circus commercial property in London for an order value of around SEK 1.6 billion. Skanska also signed a contract with Partners Group Fenchurch Ltd to build Eighty Fenchurch Street, a commercial property for offices and retail in London, with an order
value of around SEK 1.4 billion. Skanska also signed a seven-year motorway maintenance contract with Hampshire County Council in the south of England. The total value of the contract is around SEK 3.1 billion, of which SEK 890 M, corresponding to the first two years, will be included in order bookings for Skanska UK. An addi-tional seven-year motorway maintenance contract was signed with Somerset County Council in southwest England. The total value of the contract is around SEK 2 billion, but the value for the first two years of around SEK 570 M will be included in order bookings for Skanska UK. Furthermore, a contract was signed with Helical Plc to renovate the property 207 Old Street, London, with an order value of around SEK 810 M.
USASkanska USA secured several major projects during the year. The largest contract was one Skanska signed with the Empire State Development Corporation (ESD), the project development company Related Companies and Vornado Realty Trust to restore and improve the historic James A. Farley Post Office in New York. The contract is worth around SEK 11 billion. Skanska USA won a contract in 2017 with the Port Authority of New York & New Jersey to renovate and replace supporting structures and to upgrade the George Washington Bridge in New York with an order value of around SEK 3.9 billion. Skanska is investing in an office space project in Seattle under a construction contract worth around SEK 2.0 billion. Skanska has also signed a contract with the University of California San Francisco (UCSF) to build two graduate student housing in San Francisco for a contract value of around SEK 1.5 billion. A contract has also been signed with Meridian Group & Rockefeller Group to build a new office build-ing and movie theater in Tysons Corner in Virginia with an order value of around SEK 1.5 billion. As part of a joint venture with Ames Construction, Skanska has signed a contract with Riverside County Transportation Commission to build express lanes on interstate highway I-15 in California. Skanska’s share of the total order is around SEK 1.3 billion. Skanska has signed a contract with New York City Transit to renovate four subway stations along the Astoria Line in Queens, New York, with an order value of around SEK 1.3 billion. In another joint venture, with Stacy and Witbeck, Skanska has signed a contract with the city of Los Angeles to build the new Sixth Street Viaduct in the city. The order value for Skanska is around SEK 1.2 billion. Skanska has signed two contracts in Mas-sachusetts. The first is with EF Education First (EF) to construct a building on EF’s campus with an order value of around SEK 1.1 bil-lion. The second contract was to build a new sports center at Boston College in Massachusetts with an order value of around SEK 1 bil-lion. Lastly, Skanska signed an add-on order with an existing client to build a manufacturing facility in western USA with an order value of around SEK 1 billion.
Order bookings and order backlog
Order bookings Order backlog
SEK M 2017 2016 2017 2016
Nordic countries 54,720 55,984 53,779 54,107
of which Sweden 33,317 36,041 34,954 35,416
Europe 32,401 36,324 38,158 38,398
USA 64,690 77,936 96,474 103,749
Total 151,811 170,244 188,411 196,254
0
50
100
150
200
250
Kv4Kv3Kv2Kv1
2017
Kv4Kv3Kv2Kv1
2016
Kv4Kv3Kv2Kv1
2015
Kv4Kv3Kv2Kv1
2014
Kv4Kv3Kv2Kv1
2013
• Orderstock
• Orderingång, rullande 12 mån
• Intäkter, rullande 12 mån
• Orderingång per kvartal
0
50
100
150
200
250
Q4Q3Q2Q1
2017
Q4Q3Q2Q1
2016
Q4Q3Q2Q1
2015
Q4Q3Q2Q1
2014
Q4Q3Q2Q1
2013
• Order backlog
• Order bookings, R-12
• Revenue, R-12
• Order bookings per quarter
Mdr kr
SEK bn
Skanska Annual Report 201764 Report of the Directors
Order backlogThe order backlog decreased by 4 percent (increased by 1 percent in local currency) and at the end of the year amounted to SEK 188.4 billion (196.3). The order backlog is equivalent to about 15 (17) months of production. The US, Nordic and European opera-tions accounted for 51, 29 and 20 percent respectively of the order backlog.
Segment and IFRS ReportingThe Group reports its Residential Development and Commercial Property Development segments according to a method in which sales revenue and gains on the divestment of properties – residential as well as commercial – are recognized when binding sales contracts are signed. When reporting in compliance with IFRS, revenue and gains on property divestment are recognized when the purchaser takes possession of the property or home. Accrual differences within Commercial Property Development generally only occur across a few quarters. Within Residential Development, the differences can last for a longer period depending on changes in initiated projects and the rate of sales. The differences between the two methods of reporting revenue and operating income are summarized in the tables below.
Revenue
SEK M 2017 2016
Revenue by business stream according to segment reporting
Construction 150,050 138,001
Residential Development 13,237 13,264
Commercial Property Development 11,440 10,226
Infrastructure Development 81 237
Central and eliminations –13,985 –10,421
Total revenue according to segment reporting 160,823 151,307
Difference in accounting principles –2,946 –5,942
Total revenue according to IFRS 157,877 145,365
Revenue according to segment reporting increased in both Swedish kronor and local currency by 6 percent to SEK 160.8 billion (151.3). In the Construction business stream, revenue rose in SEK by 9 per-cent. SEK 22.8 billion (17.3) of revenue in Construction, equivalent to 15 percent (12), was generated by the Group’s project development operations. To reconcile with IFRS, the revenue is added from the homes and properties sold in previous years but transferred during the year. The revenue from the homes and properties that were sold during the year but are yet to be occupied by the purchaser is sub-tracted. Of the SEK 13,237 M (13,264) in Residential Development revenue, SEK 875 M (1,548) is from joint ventures and this has been included line by line according to the proportional method in segment reporting.
Operating income
SEK M 2017 2016
Operating income by business stream according to segment reporting
Construction 1,205 3,546
Residential Development 1,716 1,605
Commercial Property Development 2,714 2,336
Infrastructure Development 925 1,818
Central –944 –1,140
Eliminations –112 34
Operating income according to segment reporting 5,504 8,199
Difference in accounting principles –926 –979
Operating income according to IFRS 4,578 7,220
Operating income according to segment reporting amounted to SEK 5,504 M (8,199).
Impairment losses on current and non-current assets were charged to operating income in the amount of SEK –875 M (–534) and this was mainly attributable to intangible assets in the Construction business stream.
ConstructionIn the Construction business stream, operating income decreased by 66 percent to SEK 1,205 M (3,546). The operating margin was also lower than in the previous year and amounted to 0.8 percent (2.6). Operating income was affected by impairment losses on good-will and other tangible and intangible assets of about SEK 1.0 billion relating to the restructuring of construction operations outside the Nordic region and by project write downs of about SEK 1.5 billion. Construction operations in the Nordic region remained strong in 2017, especially in Sweden. In Poland there were project write downs of SEK 500 M due to cost increases and client claims, mainly within completed projects. In the UK there were project write downs in the amount of SEK 360 M and in the US operations of SEK 640 M. In the case of both Business Units this was driven by delayed projects and a lower than estimated pace of production. In the UK another cause for this was design changes from clients. Skanska intends to restructure the construction units in Poland. In the USA Skanska will exit the power sector and in the UK the focus will be on the core business. Finally, the operations in the Czech Republic will be adapted to the weaker market conditions.
Residential DevelopmentOperating income for Residential Development amounted to SEK 1,716 M (1,605) and the operating margin for the business stream increased to 13.0 percent (12.1), driven mainly by strong development in Sweden and Norway. Impairment losses on current assets in Residential Development were charged to earnings in the amount of SEK –14 M (–42).
Commercial Property DevelopmentOperating income for the Commercial Property Development busi-ness stream amounted to SEK 2,714 M (2,336). Properties were sold during the year for a value of SEK 10,867 M (9,555), generating capi-tal gains of SEK 2,879 M (3,111). In addition, three projects devel-oped in joint ventures were sold and reported as income from asso-ciated companies. Impairment losses during the year amounted to SEK –6 M (–198). In the previous year there were impairment losses on two projects in the so-called energy corridor in Houston, USA.
Skanska Annual Report 2017 65Report of the Directors
Infrastructure DevelopmentOperating income in Infrastructure Development amounted to SEK 925 M (1,818). The operating income includes a capital gain for the sale of the investment in the A1 motorway in Poland. Operating income in the comparison year includes the sale of the investment in the M25 motorway around London, UK. Impairment losses were charged to earnings in 2017 in the amount of SEK –11 M (–331). The impairment losses in the previous year were mainly related to wind power projects in Sweden.
CentralCentral expenses, including operations that are being discontinued, amounted to SEK –944 M (–1,140). Restructuring costs increased central expenses during the year in the amount of around SEK 100 M. Operations in Latin America, which as of 1 January 2013 are being reported under Central, had no impact on earnings and Skanska has no projects in progress in Latin America.
Elimination of intra-Group profitsReversals/eliminations of intra-Group profits amounted to SEK –112 M (34). At the Group level, this included elimination of profits relating to property projects in the Construction business stream. Eliminations are reversed when the projects are divested.
Return on equity and capital employed according to segment reporting Return on equity according to segment reporting amounted to SEK 18.6 percent (28.3) and return on capital employed in project development operations amounted to 14.5 percent (18.4) according to segment reporting. Income according to IFRS
Operating income
SEK M 2017 2016
Revenue 157,877 145,365
Cost of production and management –145,103 –131,119
Gross income 12,774 14,246
Selling and administrative expenses –9,851 –9,152
Income from joint ventures and associated com-panies 1,655 2,126
Operating income 4,578 7,220
Gross income was SEK 12,774 M (14,246). Gross income includes income from operating activities, including gains on divestments in Residential Development and Commercial Property Development. Divestments of commercial properties resulted in a capital gain of SEK 2,712 M (3,301). Selling and administrative expenses increased to SEK –9,851 (–9,152), which is equivalent to 6 percent (6) of revenue. The amount includes costs for operations that have been discontin-ued or sold.
Income from joint ventures and associated companies totaling SEK 1,655 M (2,126) is mainly from holdings reported in the Infra-structure Development business stream and includes gains from the divestment of holdings in projects.
Income after financial items
SEK M 2017 2016
Operating income 4,578 7,220
Interest income 89 71
Pension interest –102 –101
Interest expense –266 –245
Capitalized interest expense 257 176
Net interest items –22 –99
Change in fair value 24 2
Other net financial items 43 –22
Income after financial items 4,623 7,101
Net financial items amounted to SEK 45 M (–119). Net interest improved to SEK –22 M (–99). Interest income increased
to SEK 89 M (71), mainly due to higher interest rates in US market. Interest expense increased to SEK –266 M (–245), explained by an increase in the volume of construction loans in Sweden and new loans in USD. However, interest rate swaps and negative interest on bank balances made a negative contribution to interest expense rel-ative to loan volume. Capitalization of interest expense in Skanska’s own ongoing projects amounted to SEK 257 M (176).
Net interest on pensions, which is the net amount of interest expense for pension obligations calculated at the beginning of the year and the expected return on plan assets, amounted to SEK –102 M (–101). The change in the market value of financial instruments amounted to SEK 24 M (2) and is mainly due to a positive change in the market value of interest rate swap contracts.
Other net financial items amounted to SEK 43 M (–22) and the change is mainly due to positive currency effects.
Profit for the year
SEK M 2017 2016
Income after financial items 4,623 7,101
Taxes –512 –1,366
Profit for the year 4,111 5,735
Profit for the year attributable to
equity holders 4,095 5,722
non-controlling interests 16 13
Earnings per share for the year, SEK 10.00 13.96
After subtracting the year’s tax expense of SEK –512 M (–1,366), equivalent to a tax rate of 11 percent (19), profit for the year attrib-utable to equity holders amounted to SEK 4,095 M (5,722). The effective tax rate for 2017 is significantly lower than for 2016. This is mainly explained by the lower earnings for operations in USA, where the nominal tax rate up to the end of 2017 was significantly higher than in Europe. In addition, the effect of reported tax expense from tax-free sales of commercial property projects was higher in 2017 than in 2016. Remeasurement of deferred taxes at the end of the year due to the tax reform in USA had a negative non-recurring effect of around SEK –100 M. Taxes paid for the year amounted to SEK –968 M (–1,205). Earnings per share amounted to SEK 10.00 (13.96).
Skanska Annual Report 201766 Report of the Directors
Earnings per share
0
5
10
15
20
20172016201520142013
• Earnings per share IFRS • Earnings per share Segment
SEK
Comprehensive income for the year
SEK M 2017 2016
Profit for the year 4,111 5,735
Other comprehensive income
Items that will not be reclassified to the period’s profit or loss
Remeasurement of defined-benefit pension plans –399 –1,127
Tax on items that will not be reclassified to profit or loss for the period 69 189
–330 –938
Items that have been or will be reclassified to profit or loss for the period
Translation differences attributable to equity holders –599 1,165
Translation differences attributable to non-control-ling interests 8 8
Hedging of exchange rate risk in foreign operations –125 36
Effect of cash flow hedges 138 31
Joint ventures’ and associated companies’ share of other comprehensive income 83 855
Tax on items that have been or will be reclassified to profit or loss for the period –25 –4
–520 2,091
Other comprehensive income after tax –850 1,153
Total comprehensive income for the year 3,261 6,888
Comprehensive income for the year attributable to
Equity holders 3,237 6,867
Non-controlling interest 24 21
Other comprehensive income after tax for the year amounted to SEK –850 M (1,153). The change in translation differences attributable to equity holders amounts to SEK –599 M (1,165). This item, which consists of the change in accumulated translation differences when translating the financial statements of operations outside Sweden, mainly consists of negative translation differences in USD (US dol-lars) and NOK (Norwegian kroner) as well as positive translation differences in the other currencies in which the Group has transac-tions. In 2017, the translation reserve was affected by exchange rate differences of SEK –125 M (36) relating to currency hedging.
Remeasurement of the net pension liability including social insur-ance contributions amounted to SEK –399 M (–1,127). The negative effect is mainly explained by high inflation in Sweden and a lower discount rate for pension plans in the UK. The effect is offset by the actual return on plan assets being greater than the expected return on plan assets.
The effect of cash flow hedges amounted to SEK 138 M (31). The positive effect of the reserve for cash flow hedges is largely explained by changed exchange rates where forward contracts are in place for future transactions in foreign currencies and hedge accounting is applied.
The share of other comprehensive income for joint ventures and associated companies amounted to SEK 83 M (855) net. Infrastructure Development is the business stream in which the effect on the reserve for cash flow is the greatest. The item includes changes in unrealized gains and losses on hedging instruments as well as the effect of real-ized hedging instruments. The Infrastructure Development busi-ness stream uses interest rate swaps for long-term hedging of interest expense relating to long-term Infrastructure Development projects. The item includes fair value measurement of interest rate swaps of this kind from joint ventures in Infrastructure Development. The reserve for cash flow hedges is affected by fair value measurement even if Skanska will receive compensation through future client payments. The positive net effect of the reserve for cash flow hedges is explained by the fact that interest rate swaps have matured and been capitalized. This was partially offset by changed market interest rates.
Total comprehensive income for the year amounted to SEK 3,261 M (6,888).
Investments/Divestments
SEK M 2017 2016
Operations – investments
Intangible assets –255 –394
Property, plant and equipment –1,876 –1,636
Assets in Infrastructure Development –449 –1,336
Shares –154 –325
Current-asset properties –21,451 –17,108
of which Residential Development –10,801 –9,005
of which Commercial Property Development –10,650 –8,103
Operations – investments –24,185 –20,799
Total investments –24,185 –20,799
Operations – divestments
Intangible assets 1 2
Property, plant and equipment 213 411
Assets in Infrastructure Development 1,950 3,102
Shares 458 16
Current-asset properties 20,477 16,549
of which Residential Development 11,767 7,508
of which Commercial Property Development 8,710 9,041
Operations – divestments 23,099 20,080
Strategic divestments
Divestments of businesses 0 862
Strategic divestments 0 862
Total divestments 23,099 20,942
Total net investments (+)/divestments (–) –1,086 143
Depreciation/amortization, non-current assets –1,587 –1,439
Skanska Annual Report 2017 67Report of the Directors
The Group’s investments totaled SEK –24,185 M (–20,799). Divest-ments amounted to SEK 23,099 M (20,942) and the Group’s net investments amounted to SEK –1,086 M (143).
Investments in property, plant and equipment, which mainly consist of ongoing investments in operations, amounted to SEK –1,876 M (–1,636). Divestments of property, plant and equip-ment amounted to SEK 213 M (411). Depreciation of property, plant and equipment amounted to SEK –1,411 M (–1,306).
Net investments in current–asset properties amounted to SEK –974 M (–559). Projects were sold for SEK 20,477 M (16,549), while investments amounted to SEK –21,451 M (–17,108). In Residential Development investments in current–asset proper-ties amounted to SEK –10,801 M (–9,005), of which SEK –2,437 M (–1,994) was for land equivalent to 7,215 (5,759) in building rights. Finished homes were sold for SEK 11,767 M (7,508). Net divestment of current–asset properties in Residential Development amounted to SEK 966 M (–1,497).
In Commercial Property Development investments in current–asset properties amounted to SEK –10,650 M (–8,103), of which SEK –1,386 M (–1,936) was for land, and the total investments amounted to SEK –10,716 M (–8,364). Divestments of current–asset properties amounted to SEK 8,710 M (9,041). Net divestment of current–asset properties in Commercial Property Development amounted to SEK –1,940 M (938).
Investments in the form of equity and subordinated loans in Infrastructure Development amounted to SEK –449 M (–1,336) and divestments amounted to SEK 1,950 M (3,102). Net divestment in Infrastructure Development amounted to SEK 1,501 M (1,766).
Consolidated operating cash flow
SEK M 2017 2016
Cash flow from business operations 1,057 2,302
Change in working capital 3,866 –1,328
Net investments (–)/divestments (+) –1,086 –719
Accrual adjustments –243 –96
Taxes paid in business operations –892 –1,237
Cash flow from business operations including taxes paid 2,702 –1,078 Net interest items and other financial items 253 –108
Taxes paid in financing activities –76 32
Cash flow from financing activities 177 –76
Cash flow from operations 2,879 –1,154 Strategic net divestments (+) / investments (–) 0 862 Dividend etc 1 –3,879 –3,874
Cash flow before change in interest-bearing receivables and liabilities –1,000 –4,166
Change in interest-bearing receivables and li-abilities 2,619 –2,400
Cash flow for the year 1,619 –6,566
Cash and cash equivalents, January 1 5,430 11,840
Exchange-rate differences in cash and cash equivalents –51 156
Cash and cash equivalents, December 31 6,998 5,430
1 Of which repurchases of shares –440 –793
Cash flow for the year amounted to SEK 1,619 M (–6,566).
Cash flow from business operations amounted to SEK 2,879 M (–1,154). Net investments in operations amounted to SEK –1,086 M (–719). The change in working capital had a positive impact on cash flow and totaled SEK 3,866 M (–1,328). This is a result of the sale of the investment in the M25 motorway in the UK, for which the pay-ment of SEK 3.1 billion was received at the beginning of 2017.
Taxes paid in business operations amounted to SEK –892 M (–1,237).
The change in interest–bearing receivables and liabilities amounted to SEK 2,619 M (–2,400).
Cash flow for the year of SEK 1,619 M (–6,566) combined with translation differences of SEK –51 M (156) increased cash and cash equivalents, which amounted to SEK 6,998 M (5,430).
Commercial Property Development projects that were sold but not occupied as of December 31, 2017 will have a positive effect on cash flow of around SEK 6.0 billion in 2018.
Financing and liquidityAt year–end 2017 the Group had interest–bearing net receivables, including provisions, amounting to SEK –1,126 M (1,219). The Group’s unutilized credit facilities totaled SEK 8,281 M (5,713) at the end of the year. Of these, SEK 5,901 M was unutilized long–term credit maturing at the end of June 2022 and SEK 1,967 M was an unutilized long–term green loan maturing at the end of November 2019. Interest–bearing assets decreased to SEK 15,800 M (16,318). Receivables in foreign currencies accounted for 79 percent (84) of these. The average fixed interest period for all of the Group’s interest–bearing assets was 0.1 (0.1) years and the interest rate was 0.63 percent (0.58) at year–end.
Change in interest-bearing net receivables/net debt
SEK M 2017 2016
Interest-bearing net receivables/net debt, January 1 1,219 6,317
Cash flow from business operations 2,702 –1,078
Cash flow from financing activities excluding changes in interest-bearing receivables/liabilities 177 –76
Cash flow from strategic investments 0 862
Dividend etc. 1 –3,879 –3,874
Acquired/divested receivables/liabilities 0 –663
Translation differences –941 972
Remeasurement of pension liability, net –334 –1,022
Other changes –70 –219
Interest-bearing net receivables/net debt, December 31 –1,126 1,219
1 Of which repurchases of shares –440 –793
The Group’s interest-bearing liabilities and provisions increased to SEK 16,926 M (15,099), of which pension liabilities and provisions amounted to SEK 5,603 M (4,927) and construction loans to housing associations totaled SEK 5,961 M (4,839). The average fixed interest period for all interest-bearing liabilities, excluding pension liabili-ties but taking into account derivatives, was 0.5 (0.6) years. The average maturity was 1.8 (1.1) years. Including unutilized credit facilities, the average maturity was 3.5 years.
Skanska Annual Report 201768 Report of the Directors
The interest rate for all Group interest-bearing liabilities, excluding pension liabilities, amounted to 1.43 percent (1.0) at year-end. The percentage of loans in foreign currencies represented 35 percent (23). The Group’s total assets increased by SEK 2.9 billion and amounted to SEK 109.4 billion (106.5). The effect of exchange rate differences on total assets was SEK 3.0 billion.
Return on equity and capital employed
0
5
10
15
20
25
20172016201520142013
• Return on equity • Return on capital employed
%
At the end of the year, equity attributable to equity holders amount-ed to SEK 27,064 M (27,350). Apart from comprehensive income for the year of SEK 3,237 M, the change in equity is mainly explained by dividends of SEK –3,380 M and repurchases of shares totaling SEK –440 M, as well as share-based payments in connection with long-term employee ownership programs (Seop) totaling SEK 297 M.
Return on equity decreased to 15.5 percent (24.9).Capital employed at year-end amounted to SEK 44,111 M (42,605).
Return on capital employed amounted to 11.1 percent (19.2).
Equity/assets ratioThe equity/assets ratio amounted to 24.8 percent (25.8).
Parent CompanyThe Parent Company carries out administrative tasks and includes the Group Leadership Team and management units.
Profit for the year amounted to SEK 4,321 M (3,429) and mainly consisted of dividends from subsidiaries. The average number of employees was 124 (111).
Material risks and uncertaintiesConstruction and Project development operations are associated with risks and opportunities which must be managed in a systematic, consistent and efficient way to maximize both quality and profit-ability. Almost every project is unique, with size, design, schedule and commercial conditions varying depending on requirements, circumstances and the physical environment of the project. Con-struction and Project development thus differ from typical manu-facturing industry where companies have permanent facilities and serial production.
In Skanska’s operations, there are multiple types of risk. The tasks of identifying, managing and putting a price on these risks are of fundamental importance for Skanska’s profitability. The risks are normally of a technical or contract-related nature, but it is also important to consider political, ethical, social and environmental
aspects when assessing risk. Skanska works with a variety of com-mercial mechanisms and in many jurisdictions and the degree of risk may vary greatly depending on the type of contract.Skanska’s project risk management at the operational level is governed by the Operational Risk System. The philosophy for this system is that risk management is aligned with management responsibility. The system establishes how Business Units should organize their risk management process and it serves as a roadmap for all of the routines, guidelines and templates used by Skanska to manage risks and opportunities.
The Skanska Tender Approval Procedure and Investment Approval Procedure establish the level of authorization required for approval of Construction projects and project development. These procedures also provide project teams with a structured template outlining risks and opportunities. This facilitates scrutiny and approval at the level determined by the size and nature of the project.
In the Construction business stream, risks and opportunities are identified, assessed and assigned a price during the project identification and bid phases. They are then actively monitored and managed in the design and execution phases. Typical risks encoun-tered during a project’s lifecycle include: sharp increases in prices of materials or construction services, especially in long, fixed-price projects; a shortage of human resources or of certain intermediate goods; delays in the design phase or changes in design; delays in the issuance of the required permits; adverse weather conditions; unex-pected underground obstructions or utilities; unexpected geotech-nical conditions; defects in existing structures or work undertaken by other contractors. Changes and additional work required by clients can have a major impact on the scope, design and schedule of a project. It is important for such changes to be handled in a formal and structured manner, and for the effects and responsibilities for different parties to be defined as early as possible.
Another important area of risk management is that certain coun-terparties such as clients, partners, subcontractors or suppliers may have difficulty living up to their contractual obligations. Skanska regularly assesses counterparty risk in order to be prepared for this.
In the Residential Development business stream, there are risks in all phases – from concept to completed project. External factors such as interest rates, customers’ financial security and their will-ingness to buy homes are of crucial importance to all decisions made. Homes are produced for successive sale. To minimize risk, the goal is to complete development and sale of all units in a given project during a single economic cycle when variations in market conditions are small and more predictable.
Greater standardization with shorter lead times reduces expo-sure to the risk of f luctuation in market demand. Due to lengthy planning and permitting processes, ample lead time is required to ensure the supply of land and building rights in order to meet the production demand during favorable market conditions. It is also important to be ready to scale down or stop production when market conditions are less favorable. New projects are normally started when a predetermined percentage of homes have been sold or reserved in advance. Large projects are divided into multiple phases.
Risks associated with external factors, clients’ space needs and the willingness of investors to buy are managed within Commercial Property Development. Through frequent contact with clients and investors, Skanska constantly tracks demand for premises and com-pleted projects.
Skanska Annual Report 2017 69Report of the Directors
Skanska Group’s risks are mitigated through the limits established by the Commercial Property Development and Residential Devel-opment business streams on how much capital may be tied up in projects that have not been pre-leased or sold. There are also limits on how much capital may be employed by each Business Unit.
Investments in Infrastructure Development require effective risk management throughout the project lifecycle, which may be up to 50 years or even longer. This begins during the development phase, i.e. before and after contracting and close.
During the construction phase the greatest risk is that the asset in question will not be able to be operational on schedule. Depend-ing on the type of asset, there are risks throughout the operational phase, which may extend over decades. Examples of such risks are external factors – political, demographic, environmental and finan-cial – which are managed during the service life of a project. There is also a risk that lifecycle costs and operating and maintenance costs will exceed the forecasts that were made.
For a more detailed account of material risks and uncertainties, see Note 2 Key estimates and judgments. Financial risks are described in Note 6 Financial instruments and financial risk management. Significant ongoing litigation is described in Note 33 Assets pledged, contingent liabilities and contingent assets.
Disclosure requirements according to the Annual Accounts Act, Chapter 6 Section 2a Disclosures according to the Annual Accounts Act, Chapter 8 Sec-tion 2a on disclosures of certain circumstances that may affect the possibility of a takeover of the Company through a public takeover bid for the shares in the Company are presented in Note 64 Dis-closures in compliance with the Annual Accounts Act, Chapter 6 Section 2a.
Skanska Annual Report 201770 Report of the Directors
Sustainability reportIntroductionSkanska is one of the world’s leading construction and project development companies, focused on selected home markets in the Nordic region, Europe and USA. Driven by Skanska’s values – Care for Life, Act Ethically and Transparently, Be Better Together and Commit to Customers – the Group helps create sustainable futures for customers, communities and employees. This is integral to Skanska’s purpose of building for a better society, as well as delivering value for shareholders.
Skanska’s sustainability agenda linked to the core values consists of five focus areas: Safety, Ethics, Green, Community Investment, and Diversity and Inclusion. During 2017, a review was commenced of how these focus areas best fit into an evolving Skanska and society. This started with a comprehensive stakeholder dialog and materiality assessment. It led to updated strategies now in place at Group level for all five sustainability focus areas.
This report covers the period January 1, 2017, to December 31, 2017.
Stakeholder dialogueSkanska strives for an open and ongoing dialogue with the Group’s stakeholders. Engagement with customers, shareholders, employ-ees, partners, suppliers, non-governmental organizations (NGOs) and other stakeholders is a key component in day-to-day operations and long-term planning. This provides important insights regarding needs, expectations and challenges.
Skanska conducts a brand survey bi-annually, which monitors the Group’s position and perception in relation to main competitors in home markets. The survey includes external stakeholders, as well as employees. Survey topics include perception of sustainability performance.
Another survey is Skanska’s Group-wide employee survey, which was first conducted in 2017. It gives employees an opportunity to provide input to improve Skanska. Strengths and development areas for Skanska’s five sustainability focus areas are assessed.
Furthermore, Skanska, together with Columbia University, ana-lyzed sustainability maturity levels across USA. This unique project involved assessing market demand for sustainable buildings and infrastructure projects. Focus areas in the study are green and safety, including health and well-being. The study continues to be used to further guide Skanska’s efforts within US markets to enhance sus-tainability opportunities.
Materiality analysis To further cement the Group’s understanding of what should be the key focus areas in Skanska’s sustainability strategy, structured conversations with a wide range of internal and external stake-holders were conducted in early 2017. These conversations were tailored around 18 relevant topics inspired by the United Nations Sustainable Development Goals, the UN Global Compact and the Global Reporting Initiative, alongside current industry trends and initiatives.
The outcomes of these interviews and an evaluation of Skanska’s sustainability impacts enabled a further assessment of sustainability. This identified 13 material sustainability topics that Skanska can positively influence. These have been grouped in accordance with Skanska’s five sustainability focus areas: Safety, Ethics, Green, Community Investment and Diversity and Inclusion.
The five sustainability focus areas are strengthened by their con-nection to the United Nations’ Sustainable Development Goals (SDGs). The SDGs further direct Skanska’s efforts to make the most significant positive contributions to society.
For the sustainability focus areas, Skanska has been securing a clear governance structure, and establishing appropriate key per-formance indicators and methods for follow-up. This work will continue during 2018 to ensure all material sustainability topics are covered by a suitable measurement and reporting framework.
Through the materiality analysis, the below sustainability topics were identified as material to Skanska’s external and internal stake-holders. The Group is focusing on the 13 topics located in the blue shaded area. Those selected topics are categorized according to Skanska's five sustainability focus areas.
Materiality analysis
Skanska's five sustainability
focus areas
Safety
Ethics
Green
Community investment
Diversity and inclusion
Ma
teri
al t
o S
kan
ska
’s s
take
ho
lde
rsLo
wH
igh
Skanska’s impact on sustainability topics HighLow
Anti-corruption
Diversity and inclusion
Public influencer
Ethics, culture and values
Human rights
Carbon impact
Water
Waste
Environmental responsibility in projects
Green products and services
Health and safety
Sustainable cities
Energy
Construction material and resource usage
Community investment
Biodiversity
Environmental requirements for suppliers and business partners
Social requirements for suppliers and business partners
Skanska Annual Report 2017 71Report of the Directors
SafetySkanska aspires to have injury-free workplaces, as part of living the Group’s Care for Life value. Care for Life was the catalyst for the Group to begin developing a health and well-being strategy for all Business Units. Health issues in construction have not been given the same priority as accident injuries, and Skanska is determined to balance those efforts.
The health and well-being strategy, approved in 2017, is based on ensuring healthy workplaces, helping employees and workers to be physically and mentally fit so they can perform at their best and live full lives. This includes providing improved practices to reduce long-term health hazards, such as noise, dust and poor ergonomics. The intent is to prevent work activities from causing or worsening ill health, both physical and mental.
Furthering a caring cultureThe health and well-being strategy is founded on a health and well-being matrix that identifies six topics – leadership, knowledge, physical well-being, mental well-being, metrics and communica-tion – around which new and existing programs will be formed. It will also give clear opportunities for Business Units to develop their own plans and identify specific areas for better knowledge sharing. For example, sharing the range of actions, programs and techniques used across Skanska to mitigate harm from musculo-skeletal injuries.
Raising global safety standardsAt Skanska jobsites, everyday workers are carrying out activities that, if uncontrolled, can expose them to unacceptable safety risks. That is why Skanska introduced Global Safety Standards in 2008 and regularly reviews and updates them. These standards are sig-nificantly beyond legal requirements to help raise the safety perfor-mance of Skanska and the Group’s supply chain.
During 2017, the Global Safety Standards were revised and four new ones added. These will all be incorporated into Business Unit safety systems by early 2018. These standards are an important part of how Skanska strives for a more consistent safety performance across all home markets: with injury reduction and also with mind-set, attitude and behaviors.
Skanska aspires to have injury-free workplaces, as part of living the Group’s
Care for Life value. With Skanska's caring culture, everyone is responsible for
their own safety, and the safety of those around them.
Safety journeyThe health and well-being strategy and updated Global Safety Standards represent progress on Skanska’s journey to eliminating injuries. Other steps include developing safety culture programs; conducting thorough safety reviews to identify underlying obsta-cles to safety improvement; and training senior managers to be role models for demonstrating their safety commitment.
Safety Ethics GreenCommunity Investment
Diversity and Inclusion
• Health and safety • Anti-corruption
• Ethics, culture
and values
• Human rights
• Carbon impact
• Energy
• Water
• Waste
• Environmental
responsibility in
projects
• Green products and
services
• Sustainable cities
(shared with Com-
munity Investment)
• Sustainable cities
(shared with Green)
• Public Influencer
• Diversity
and inclusion
Skanska’s five sustainability focus areas (with selected sustainability topics from materiality analysis)
Skanska Annual Report 201772 Report of the Directors
Safety performanceSkanska’s primary lagging indicator for safety is the lost-time acci-dent rate. In 2017, the lost-time accident rate was 3.4 (2.8). Also in 2017, there were 730 (638) lost-time injuries, in which people were not available to work their next shift, and 1,029 (1,058) injuries of all types.
Also during the year, there were three work-related fatalities on Skanska project sites, two in Poland and one in Sweden. Each fatality involved a subcontractor employee. Following each fatality, Skanska held a Global Safety Stand Down at every workplace to share learn-ings from the accident with colleagues, and to pay respects.
Lost Time Accident Rate (LTAR) 2009–2017
Number of employee lost-time accidents multiplied by 1,000,000 hours divided by total labor hours. Inclusive of Skanska employees plus subcontractors working on Skanska jobsites.
0
1
2
3
4
5
6
7
201720162015201420132012201120102009
3.94.4
3.5 3.53.3 3.3
4.2
2.8
3.4
Fatalities (2005-2017)
Number of fatalities on Skanska project sites, inclusive of Skanska employees and subcontractor employees.
0
3
6
9
12
15
2017201620152014201320122011201020092008200720062005
Number
13
6
8
12
9 98
23 3
5
3 3
EthicsIn 2017, Skanska continued to further the Group’s strong ethical culture, which is central to living the Act Ethically and Transpar-ently value. An ethical breach continues to be among the Group’s top risks, according to the annual Group-wide risk survey.
Skanska’s Code of Conduct provides employees with expectations for everyday behavior. As a follow-up to the Group’s latest Code of Conduct, which was introduced in September 2016, the focus during 2017 was training on the Code’s principles. Code of Conduct training is consistent in all units, helping align behaviors across Skanska.
Anti-corruption measuresIn 2016, a new anti-corruption policy was issued to reinforce Skanska’s commitment to anti-corruption, as described in the Code of Conduct. In 2017, the Board of Directors and the senior executives completed anti-corruption training.
Supporting human rightsIn construction and project development, Human rights are a significant issue, partly attributable to the transient nature of the trade workforce. Skanska is proactive as one of the first companies in construction and project development to audit suppliers for eth-ics. The Supplier Code of Conduct includes Human righs issues such as fair working conditions and equal treatment. The Supplier Code applies to our supply chain and describes the expected behav-ior of providers of goods and services in their work with Skanska. Skanska is continually working to improve Group Human rights management and reporting.
Skanska’s Code of Conduct Hotline – operated by a third-party provider – provides a mechanism for employees and suppliers’ employees to anonymously report human rights issues. Skanska diligently investigates every allegation of human rights violations related to Group projects, including improper wages, hours and working conditions.
Furthermore, many projects have controlled access to ensure only verified personnel are on-site.
Skanska Annual Report 2017 73Report of the Directors
Values align with customersTo enable employees to live Skanska’s values and abide by the Code of Conduct, the Group only works with customers that do not cause Skanska’s values to be compromised.
Increasingly, Skanska is awarded contracts based on alignment between the Group’s values and customer values or priorities. An efficient relationship develops when values align because trust is higher and energies from all stakeholders can be focused on delivering the project.
Code of Conduct training is consistent in all units, helping align behaviors
across Skanska.
Supply chain risks and opportunitiesSkanska depends upon tens of thousands of suppliers each year to fulfill customer obligations. Suppliers represent both performance and ethical risks. If a supplier has an ethical breach on a Skanska project, then Skanska’s brand is jeopardized by association.
The performance risk of suppliers relates to their ability to per-form, which depends upon financial resources, access to labor, ability to procure materials, and management skills. For many projects, Skanska pre-qualifies suppliers based on set criteria. For the rest of the projects, Skanska reviews suppliers after they submit a tender, and prior to a contract award.
The Supplier Code of Conduct describes the behaviors expected of suppliers. In 2017, Skanska increased due diligence efforts on the Group’s broad network of consultants, partners, suppliers and sub-contractors. This increased scrutiny – done through a risk-based approach – will continue to intensify, further ensuring adherence with the Supplier Code of Conduct.
Suppliers also represent opportunity. By collaborating with the Group’s supply chain, Skanska can build for a better society at higher levels. The Group’s sustainability goals depend on the entire supply chain, so it is important that expectations are communicated. Skanska’s values of Act Ethically and Transparently and Be Better Together are especially relevant in regards to working with suppliers.
GreenSkanska’s environmental commitment relates to impacts of the Group’s operations and processes, and the long-term environmental performance of buildings and infrastructure delivered by the Group. In keeping with the Care for Life value, Skanska promotes green solutions and seeks to conduct operations in green ways. Through the Group’s Journey to Deep Green™, Skanska aspires to go beyond compliance and to push toward future-proof projects – projects intended to accommodate future environmental demands and conditions.
In 2017, Skanska approved a new green strategy, which will better position the Group to succeed in delivering Profit with Purpose beyond the current 2020 business plan. This strategy focuses on zero/low-carbon solutions, which support the carbon reduction ambitions of many customers and of society. Another part of the strategy is significantly reducing the Group’s carbon emissions footprint by 2030, in line with the Paris international climate agreement.
Beyond providing benefits to customers, the environment and society, Skanska’s ambition to minimize carbon emissions also drives improved efficiencies in the Group’s operations. It reduces usage or emissions of energy, carbon, materials and water, lowering costs and requiring smarter and more collaborative ways of working. To further this strategy, during 2017 Skanska conducted carbon analyses and worked on developing carbon roadmaps and action plans. This work continues in 2018.
Environmental policy and environmental management systemSkanska’s environmental policy and Color Palette™ define the Group’s environmental agenda and provide a framework for con-tinually improving the environmental credentials of projects, prod-ucts and services. Environmental performance is measured and reported quarterly through Green Strategic Indicators (GSI).
The environmental policy is converted to day-to-day practice through an environmental management system, ensuring effective management of environmental risks. This system supports the achievement of Skanska's business objectives and goals. Each office and project site is covered by an environmental management system third-party certified to the ISO 14001 international environmental management standard. Skanska has 26 certificates across the Group. Skanska is recertifying to the ISO 14001:2015 standard; this has been achieved by five Business Units.
In 2017, Skanska received one major non-conformance (MNC) citations from external auditors. It was closed two weeks after the audit. In the previous five years, the Group received zero major non-conformance citations. Skanska actively encourages the Group’s auditors to provide suggestions for improvement.
Green in action Sustainability responsible sourcing guideThe process to ensure that Skanska’s supply chain is in line
with Group sustainability requirements and the Supplier
Code of Conduct has differed by country. To align approaches,
development of a best practice guide for responsible sourcing
was begun in 2017, covering sustainability issues with a
comprehensive focus on green. In 2018, the best practice
guide will be further developed and implemented. This guide
will enable knowledge sharing and will direct the assessment
of sustainability risks in procurement.
Skanska Annual Report 201774 Report of the Directors
Skanska Color Palette™Since 2009, the Skanska Color Palette has defined the Group’s vision of Green and Deep Green projects according to four priority opportunities: energy, carbon, materials and water. These areas provide Skanska with the greatest opportunities to lower project environmental impacts. The Skanska Color Palette sets the strategic green direction for projects, and is used to define goals and develop action plans, driving continuous improvement.
VanillaCompliance
GreenBeyond Compliance
Deep Green Future Proof
Energy
Carbon
Materials
Water
Net zeroPrimary Energy
Near Zero CarbonConstruction
Zero Unsustainable Materials
Zero Hazardous Materials
Zero Waste
Net Zero Water
The Skanska Color Palette is a tool to measure and strategically guide green activities.
On the Color Palette, the Vanilla zone is the starting point, where construction processes and/or building and infrastructure perfor-mance are compliant with laws, regulations, codes and standards. In the Green zone, they are beyond compliance, but do not have a near-zero environmental impact. In the Deep Green zone, they have a near-zero impact on the environment, ensuring that the project is future-proof.
Measuring green performanceSkanska uses Green Strategic Indicators to measure green perfor-mance. These cover three areas: increasing the level of green busi-ness; management support and training employees on green sub-jects; and supporting teams to deliver projects with improved green profiles. In late 2016, Skanska implemented a database for Business Units to report Green Strategic Indicators and chart follow-up per-formance. In 2017, that database was further developed.
2017 green resultsGreen products and services as defined in the Skanska Color Palette, Green refers to when construction processes and/or building and infrastructure performance are beyond compliance, but do not have a near-zero environmental impact. By 2020, the Group aims to have all project developments be 100 percent Green, as defined by the Skanska Color Palette. Internally, Skanska measures Green revenue for Construction Business Units and Green value for Proj-ect Development units.
Greenhouse gas reportingSkanska’s greenhouse gas reporting covers all Business Units. We measure carbon emissions in accordance with the Greenhouse Gas Protocol. Activity data is based on invoiced data, real-time meters, models and estimates or data as reported by suppliers. Energy con-versions are done using publically available conversion factors and emission factors are sourced from open databases like International Energy Agency (IEA) and Reliable Disclosure Systems for Europe (RE-DISS). Greenhouse gases included in the reported carbon
inventory are carbon dioxide (CO2), methane (CH
4) and nitrous
oxide (N2O). Skanska applies the financial control approach. Emis-
sions data is subject to inherent uncertainties due to incomplete scientific knowledge used to determine emission factors and result-ing effects on measurements and estimations. A limited assurance engagement of the Skanska carbon emission inventory is under-taken by Skanska's auditors EY; see more information on page 187. For further details and data, see https://group.skanska.com/sustainability/green/carbon/how-we-report-greenhouse-gases.
Direct (scope 1) and indirect (scope 2) emissions expressed in tons carbon dioxide equivalent (CO2e)
Tonnes CO2e 2017 2016 2015 2014 2013
Scope 1 275,537 312,800 330,758 367,791 386,154
Scope 2
Location-based method 55,464 52,704 49,207 60,494 51,305
Market- based method 71,389 73,300 – – –
Carbon emission categoriesScope 1 emissions include direct emissions that occur from sources owned or controlled by Skanska, such as boilers, furnaces and vehicles. Scope 2 includes indirect emissions from the generation of electricity, heating and cooling purchased and consumed by Skanska. Scope 2 emissions physically occur at the facility where the electricity, heat and cooling is generated.
Recognition for environmental leadershipIn 2017, Skanska achieved Leadership level (A-) in the CDP (Carbon Disclosure Project) climate change, water and forest/timber rating. This indicates Skanska has implemented actions to manage envi-ronmental impacts related to climate change, water, and forest and timber.
Green in actionAdvancing toward carbon neutralitySkanska Sweden in 2015 set the ambitious goal of making its
operations, including its value chain, carbon neutral by 2050.
This target includes emissions from the whole value chain,
including production and transportation of construction
materials, construction processes and customers' end-use
operations.
To advance toward this goal, Skanska Sweden has worked
intensely to conduct analyses and prepare strategies on how
to significantly reduce carbon emissions. This knowledge will
be used by the Group when all Business Units in 2018 work
on setting carbon reduction targets aligned with the Paris
climate agreement. Skanska’s Group-wide goal is to signifi-
cantly reduce carbon emissions by 2030.
Skanska Annual Report 2017 75Report of the Directors
EnergySkanska’s approach to energy is focused on what the Group can directly control and influence. Skanska aims to boost energy effi-ciency in construction operations and in the end use of buildings and infrastructure; substitute fossil fuels with renewable energy where economic conditions are favorable; and prioritize net zero primary energy buildings – buildings that produce as much energy as they consume, on average.
Total energy usage (MWh)
2017 2016 2015 2014
Fuel usage (non-renewable) 1,023,242 1,121,646 1,278,787 1,398,823
Diesel/Gas oil 502,832 557,122 658,394 843,483
Residual fuel oil 152,078 196,159 204,464 145,996
Liquefied petroleum gas (LPG) 88,277 59,560 82,609 91,718
Liquefied Natural Gas (LNG) 105,687 97,708 124,475 121,878
Motor gasoline 84,258 112,032 108,876 83,312
Kerosene 0 0 0 0
Other: Pulverized coal 90,110 99,065 99,969 112,436
Fuel usage (renewable) 68,094 54,482 271 1,257
Biogasoline 23 124 271 1,257
Biodiesel 68,071 54,358 0 0
Electricity usage 272 ,979 263,246 259,479 365,087
Non-renewable 154 ,363 143,037 104,502 365,087
Renewable 118,616 120,209 154,977 0
District heating usage 11,740 3,721 573 3,851
District cooling usage 1,499 2,597 196 195
Total energy usage (MWh) 1,377,555 1 445,692 1,539,306 1,769,213
WaterAs a construction and project development company, Skanska has a great impact on water usage, both during the construction phase and with the end use of buildings and infrastructure. Water is recognized as a priority area on the Skanska Color Palette.
In 2016, Skanska for the first time collected water data on a Group level. In 2017, Skanska scored Leadership level (A-) in the CDP water questionnaire. Skanska is continually working to improve Group water management and reporting.
Green in actionInnovative water efficiency solutionsSkanska integrates water efficient solutions into projects. For
example, the Botanica K Residential Development project
in the Czech Republic uses an innovative water solution for
grey water management. Treated water from washbasins,
bathtubs and showers – along with collected rainwater – is
used for flushing toilets. This, combined with other water
efficiency solutions, reduces potable water consumption by
about 40 percent.
At Botanica K, treated water from washbasins, bathtubs and
showers is used for flushing toilets, helping save water and energy.
WasteThe Skanska Color Palette focuses on increased material efficiency: reuse and recycling of materials and products. It challenges projects to produce zero self-generated construction waste.
Striving to reduce construction waste benefits the environment while enhancing operational efficiency and cost performance. The Group’s goal for self-generated waste diverted from landfill exceeds 95 percent.
In some markets, it is common industry practice to exclude waste from subcontractor operations when compiling waste data. That approach does not meet Skanska’s expectations, and efforts have been undertaken in the relevant Business Units. The Group is improving by incorporating more subcontractor waste data.
Total amount of self-generated waste diverted from landfill from Construction units, 2009-2017 (percent)
0
20
40
60
80
100
201720162015201420132012201120102009
%
8388 90
95 94 94 94 95 95
Green in actionRe-using waste materialAt the D4 Skalka – junction II/118 highway project in Czech
Republic, Skanska re-used waste material from the nearby
uranium mines as aggregate in the construction process. The
aggregates had excellent mechanical properties, and were
tested and approved for safe use. This approach provided a
new use for waste materials while minimizing transportation
costs and carbon emissions. This demonstrates how Skanska
contributes to society by reusing existing materials to minimize
environmental impacts and reduce costs.
Skanska Annual Report 201776 Report of the Directors
Green loans and bondsIn 2017, Skanska Financial Services collaborated with four banks to establish a Green credit line of about SEK 2 billion. This Green revolving credit facility – the first in the corporate sector – is a backup for Skanska’s Green bond, which invests primarily in Green Commercial Property Development projects. Skanska’s Green Bond Framework is endorsed by the Center for International Climate and Environmental Research, an independent research center associated with the University of Oslo, Norway. By the end of 2017, Skanska’s central funding amounted to SEK 4.6 billion, of which approximately half consisted of Green financing, including Green bonds.
Sustainable citiesMore than half of the Earth's population lives in urban environments, making high-performing urban settings necessary to enable people to thrive. Skanska has an important role in this.
In cooperation with citizens, local communities, authorities and other stakeholders, the Group identifies how to address some of society’s most important social and environmental challenges. Through design, Skanska helps improve neighborhoods, and by focusing on resilient and low-carbon solutions, the Group creates resource-efficient cities. Some examples are:
• Developing offices and residential areas with good access to public transportation, and facilitating bicycle and electric car sharing pools
• Utilizing Skanska's patented Deep Green Cooling technology – cooling buildings through ground storage – on Commercial Property Development projects in the Nordics and Europe
• Supporting environmental certification systems for building and infrastructure projects – including Living Building Challenge, LEED, Envision and CEEQUAL – to increase efficient uses of resources
• Establishing integrated movement patterns in residential projects to promote an inclusive society
• Creating public spaces that enhance trust and promote safety.
Community InvestmentIn 2017, a new Community Investment Guideline was approved by the Group. The guideline outlines a new direction to enhance the impact of Community Investment activities, and to further embed Community Investment into Skanska.
This approach will help better connect Community Investment efforts to core operations; strategically identify opportunities for creating shared value among communities, customers and Skanska; and effectively deliver social value within three focus areas: education, employability and design for social impact. The three areas are where Skanska has the greatest possibilities to make posi-tive impacts.
EducationIn supporting education, Skanska partners with schools and other organizations to provide younger generations with role models. This is to inspire further study and promote STEM (science, tech-nology, engineering and math) learning, along with encouraging greater diversity in construction and project development.
Community Investment in actionAward-winning partnershipIn Finland, the construction industry has many aging workers
and vocational schools have a high dropout rate. Skanska,
together with partners, developed a program called 2+1
that helps solve both issues. It provides young adults with
a yearlong paid apprenticeship under the guidance of an
experienced mentor, along with two years of study. This
opens opportunities for the younger generation while pro-
viding older workers with a special opportunity to share their
knowledge. By the end of 2017, 15 young adults had com-
pleted the program, and Skanska hired all of them.
In 2017, the program received an award for its innovative
approach from the Finland Ministry of Economic Affairs and
Employment and Sitra, Finland’s national innovation fund.
The awards jury described the program as a practical model
replicable in other industries.
Skanska Annual Report 2017 77Report of the Directors
In Finland, the 2+1 program matches the expertise of older workers with
students needing training to build a career. It provides employment and builds
a source of skilled construction workers.
Employability By focusing on employability, Skanska seeks to increase local employment by supporting diverse groups in gaining the skills necessary to enter or advance in the job market. This also helps create a diverse pool of potential employees for Skanska.
Community Investment in actionPathways to active participation in societyIn Östersund, Sweden, the local housing authority wanted
to reduce unemployment amoung young adults and provide
opportunities for people newly arrived to Sweden. To help
create a sustainable solution to those issues, the authority
included this social sustainability criteria in the procurement
for a construction partner for a housing project.
After Skanska was awarded the project, the Group collab-
orated with the authority and other partners to create a pro-
gram called the Inclusion Academy. The Inclusion Academy
provides language lessons, social activities, coaching sessions
and valuable on-the-job experiences to skilled migrants and
the young unemployed.
In 2017, 41 out of 54 participants, 76 percent, secured employ-
ment or educational placements, providing a big boost to them
becoming active participants in the local society and workforce.
Skanska played a key role in creating the Inclusion Academy, which provides
opportunities on projects like this for those newly arrived to Sweden.
Design for social impact Skanska uses design to help improve communities and bring them together. This can involve creating integrated movement patterns to reduce segregation; opening shared spaces to enhance trust, health and safety; producing murals that inspire and explain; and generating inclusiveness by improving accessibility for people with disabilities.
Community Investment in actionCreating buildings accessible to allIn Poland, Skanska has created a partnership with the Inte-
gration Foundation, which works to ensure that buildings
are accessible to people with different needs, including the
disabled and elderly. Skanska has committed to certifying all
new Commercial Property Development projects in Poland
with the Building without Barriers certification, which the
foundation established to recognize highly accessible buildings.
The partnership enables Skanska to set the standard for
accessibility with holistic and modern design solutions inte-
grated early into the design phase. This partnership also pro-
vides value to office tenants, as those customers appreciate
how the Buildings without Barriers certification supports the
diverse workforces they need to thrive.
Skanska Annual Report 201778 Report of the Directors
Office tenants value the Building without Barriers certificate, as it supports the diverse workforces they need to be successful.
Public influencerSkanska engages with the public to raise awareness of various social matters, including workforce development and planning for inclu-sive and safe communities.
A great platform for doing this is Almedalen Week, a prominent Swedish event at which many thousands of people from political parties, companies and organizations meet to share perspectives. At Almedalen in 2017, Skanska organized various seminars, including a session on the importance of making the right demands in public procurement regarding social and environmental aspects of sus-tainability. Another Skanska-organized session was about creating more integrated cities and safer societies. Ministers of the Swedish Government and members of the Swedish Parliament participated in Skanska's seminars.
Diversity and InclusionSkanska has set a vision of mirroring society’s diversity at all levels, and encouraging leaders to be excellent in fostering an inclusive culture. In 2017, Skanska continued strategically working to achieve this diversity and inclusion vision, which is integrated into the 2020 Profit with Purpose Business Plan. Skanska sees having a high level of focus on diversity and inclusion as a competitive advantage that also supports society.
The Group-wide Diversity and Inclusion vision and strategy are common to all Business Units. Each Business Unit is responsible for adapting the overall strategy into action plans appropriate for them, and then cascading these plans. Since Business Units are organized differently and there are differences between geographic markets, the specifics of the action plans and process of integrating the actions varies.
The two Construction Business Units furthest ahead with diversity and inclusion are Skanska Sweden and Skanska UK. For several years, Skanska Sweden, organized by regions, has had regional diversity and inclusion scorecards and targets. In 2018, regional diversity and inclusion action plans are compulsory and will be integrated into the business planning process. Skanska UK expects all major projects to have diversity and inclusion action plans. Both implementation methods include workshops and assessments.
Diversity and Inclusion in actionInnovative recruitment programs Skanska Sweden and Skanska UK have developed innovative approaches for recruiting from groups not traditionally priori-tized by the construction industry. Skanska Sweden’s International Leadership Program provides a path and resources for highly skilled immigrant engineers to have fulfilling Skanska careers. Through the program, which began in 2014, Skanska Sweden hired 36 immigrant engineers - 66 percent of participants - to take on leadership roles. Skanska UK's Return to Work program recruits people who have taken career breaks of two years or more from any industry, including those who paused their careers to care for children. It includes a 12-week internship. Through 2017, Skanska has hired 15 people through Return to Work, 10 as permanent hires. Four of those people have been promoted.
Outperforming industry benchmarksWith the 2017 Group-wide employee survey, responses to diversity and inclusion questions were 3 to 6 percentage points higher than the external benchmarks. The survey also established a strong internal correlation between inclusive leadership, retention and effectiveness: managers who lead inclusively are also more likely to retain key people and run effective teams.
Diversity progressAt the Group level, headcount statistics show continued positive progress with diversity, though the degree of advancement varies between Business Units. One of the more successful units is Skanska Sweden, which increased the share of women in senior line positions from 10.3 percent in 2015 to 18.1 percent in 2017. In terms of ethnic diversity, Skanska Sweden continues to improve in mir-roring society’s diversity, such as through the International Leader-ship Program.
Employees by gender
2017, % 2016, % 2015, %
Category Men Women Men Women Men Women
All employees 83 17 83 17 85 15
Senior executives 67 33 78 22 78 22
Skanska AB Board of Directors 71 29 77 23 79 21
Skanska Annual Report 2017 79Report of the Directors
Governance for sustainability
Skanska has a Group-wide sustainability governance structure. Group Leadership Team members have responsibility for the five sustainability focus areas, with each area backed by a Group-level support unit led by Senior Vice Presidents or Global Managers. The heads of each sustainability area meet regularly in the Sustainabil-ity Umbrella Group to drive and coordinate actions within sustain-ability across Business Units.
The Group support units have regular meetings with representa-tives from all Business Units to share best practices and knowledge. Sustainability is also prominent on the agenda at Skanska’s biennial Management Meetings, reaching 750 senior managers.
Code of ConductSkanska’s Code of Conduct is key to bringing the Group’s values to life. The Code of Conduct describes the expected behavior of every employee in interactions with fellow employees, customers, local communities and other stakeholders. All Skanska employees must adhere to the principles and requirements contained in the Code of Conduct; this includes part-time, contract and temporary employees.
The current Code of Conduct was introduced in 2016, and during 2017 Group-wide training has been conducted covering all employees in all regions of operations. All employees receive Code of Conduct training every two years, and new employees are trained within one month of starting with Skanska.
The Code of Conduct is supplemented by the Supplier Code of Conduct, which must be adhered to by all subcontractors, suppliers, consultants, intermediaries and agents. The Supplier Code of Con-duct is included in agreements with these parties as guidance on expectations of them and on what they can expect from Skanska. The Supplier Code covers topics such as fair working conditions; discrimination and harassment; anti-corruption and anti-bribery; and fair competition.
Code of Conduct HotlineSkanska’s Code of Conduct Hotline provides a mechanism for employees, suppliers’ employees and other third parties to anony-mously report on breaches or suspected breaches of the Group’s Code of Conduct. The hotline is managed by an independent third-party service provider.
Global commitmentsSkanska became a signatory of the United Nations Global Compact in 2001, and continues to support the Global Compact’s Ten Principles. This sustainability report constitutes Skanska’s Communication on Progress (COP) and shows how the Group has continued to implement the Ten Prin-ciples during 2017.
Skanska supports the rights of all people as described in the Universal Declaration of Human Rights adopted by the UN, and in the conventions of the International Labor Organization. Skanska is also committed to the World Economic Forum’s Partnering Against Corruption Initiative, of which Skanska is a founding member.
Skanska is an active participant in international sustainability initiatives, including United Nations Global Compact Network; the International Chambers of Commerce; World Green Building Council; World Business Council for Sustainable Development; ChemSec, which works to reduce hazardous chemicals; and Cata-lyst, which promotes women in the workplace.
Awards and recognitionSustainability-related awards and recognition received by Skanska during 2017 include:
• Skanska topped the Sustainable Brand Index, which ranks per-ceived performance with environmental and social sustainability among large business-to-business companies in the Nordics.
• The Brock Environmental Center, Virginia Beach, USA, was recognized at the Green Solutions Awards 2017 in the Health and Comfort category. This award was presented during the United Nations Climate Change Conference in Bonn, Germany.
• Skanska UK achieved six external awards for Diversity and Inclu-sion work. These included ranking in the top 20 of the UK’s most inclusive employers in the 2017 Excellence in Diversity Awards.
Skanska Annual Report 201780 Report of the Directors
Sustainable Development Goals index
Sustainable Development Goal Strategic approach Examples
Skanska’s sustainability focus areas
Achieve gender equality and em-power all women and girls
Skanska’s Diversity and Inclusion vision, strategy, change journey map and Business Unit action plans provide a framework for continuous progress with diversity and inclusion. Recruiting and developing women is an important focus area, along with reinforcing a fair and inclusive workplace culture. Results are tracked via employee statistics, and specific questions on the annual Group-wide employee engagement survey.
Skanska is steadily increasing the number of women in senior positions. All Project Development Business Units and the Construction units in the Nordics and the UK have women in line positions on their management teams. Across Skanska, there is zero tolerance for any form of discrimination and harassment. The importance of an inclusive and fair workplace is strongly emphasized in the Code of Conduct. With Skanska Sweden, gender equality is an important aspect of the regional diversity and inclusion scorecard.
Diversity and Inclusion
Ensure access to water and sanitation for all
Skanska works with water use during the construction of buildings and infrastructure, and through design choices often influences water usage during the full lifecycle of those assets. The Skanska Color Palette, a tool to mea-sure and strategically guide green activities, defines the Group’s ambition for efficient water use.
In San Francisco, USA, Skanska designed and built a two-station extension of the Bay Area Rapid Transit light-rail transit system. Ninety percent of water used during construction was from non-potable sources, a reduction made possible by innovative methods. Also, the stations are designed to use around 38 percent less water than standard solutions, annually saving more than 20,000 liters.
Green
Ensure access to affordable, reliable, sustainable and mod-ern energy for all
Energy efficiency provides significant value to customers as it reduces their carbon footprints while lowering operational costs. Energy efficiency is a focus area in the Skanska Color Palette.
Skanska has focused on energy efficiency for many years. Over the last 15 years, energy consumption fell by an average of 60 percent in Skanska-developed office buildings in the Nordics.
Green
Promote inclusive and sustainable economic growth, employment and decent work for all
Skanska’s Code of Conduct guides employees in how to act in appropriate and ethical ways. The Group’s Supplier Code of Conduct explains expected behaviors to supply chain partners.
Skanska is committed to achieving injury-free and trans-parent workplaces. Skanska applies the Group’s Global Safety Standards at all project sites and does not tolerate behaviors that fall below Group requirements.
Skanska has strengthened the Group’s culture of reporting alleged breaches of the Code of Conduct and Supplier Code of Conduct. Skanska remains vigilant to detect and act on any form of human rights violation and other alleged breaches.
To help raise industry safety standards, Skanska works to improve the supply chain’s understanding and applica-tion of safety requirements. Skanska Safety Week, one of the world’s biggest safety events, includes industry partners in several markets. The Group continually looks to improve employees’ knowledge and skills regarding safety.
Ethics
Safety
Sustainable Development GoalsSkanska recognizes the United Nations’ 17 Sustainable Develop-ment Goals, which demonstrate the scale and ambition of the worldwide 2030 Agenda for Sustainable Development. Skanska’s sustainability review commenced during 2017 highlighted strong ties between sustainability at Skanska and the United Nations’ Sus-tainable Development Goals (SDGs). During 2017, the Group iden-tified the eight SDGs most relevant to Skanska, shown below.
As a project development and construction company, Skanska has a significant ability to influence Goal 11, Sustainable Cities and Communities – this directly relates to the Group’s core business. In 2017, Skanska also focused on seven other closely related SDGs. Through these eight SDGs, the Group seeks to harness intercon-nected opportunities and risks.
Skanska Annual Report 2017 81Report of the Directors
Sustainable Development Goal Strategic approach Examples
Skanska’s sustainability focus areas
Build resilient infra-structure, promote sustainable industri-alization and foster innovation
Skanska seeks to minimize negative environmental impacts, with energy as an important area. The Group collaborates with partners to create improved solutions that lower negative environmental impacts throughout the life cycle of buildings and infrastructure.
The public-private partnership (PPP) business model uses lifecycle cost analyses to guide decision making – it determines what provides the greatest long-term value. This approach future-proofs the investments, and also helps minimize environmental impacts.
Skanska is a partner in Powerhouse, a Norwegian con-sortium that produces pioneering buildings in Norway that generate more energy than consumed throughout a 60-year life cycle, including construction and building operation. This is done by applying existing technologies in innovative ways.
For the I-4 Ultimate public-private partnership highway project in Orlando, USA, Skanska’s consortium has a 40-year concession that includes operations and main-tenance. A life cycle cost approach to asphalt pavement rehabilitation strategies is estimated to save USD 38 M over the concession. Also, to help ensure the highway’s resilience to extreme weather, the road base will be about 1 meter above seasonable high water levels.
Green
Make cities inclusive, safe, resilient and sustainable
Reaching high levels of external certification – such as LEED, BREEAM, CEEQUAL and Envision – has for years been an important way for Skanska to verify that buildings and infrastructure delivered to customers and society achieve a high sustainability standard. Also, through the Skanska Color Palette, the Group focuses on environmental areas of importance for society.
Skanska aims to improve communities through holistic design solutions. This can involve creating integrated movement patterns to reduce segregation, opening shared spaces to enhance trust, promoting health and safety in the built environment, and by improving inclu-siveness through increased accessibility for people with different needs.
Skanska had a leading role in guiding the development of the Envision sustainability rating system for civil infrastructure, a system increasingly used in the USA. Skanska designed and built the first rail transit project certified under Envision, the Expo Line Phase II light rail in Los Angeles, USA.
In Poland, Skanska, together with partner Integration Foundation, is setting a higher bar for making buildings that are accessible to people with different needs, such as the disabled and elderly. Skanska is certifying all new Commercial Property Development projects in Poland to the Building Without Barriers certification, which recognizes highly accessible buildings.
Green
Community investment
Ensure sustainable consumption and production patterns
Efficient use of resources is important for Skanska to lower negative environmental impacts while lowering project costs – benefiting the environment and customers. Minimizing waste and responsible use of resources are Skanska Color Palette focus areas.
Skanska is designing and constructing the European Spallation Source in Lund, Sweden. There are high green ambitions for this research facility, including zero waste to landfill. Achieving this target is requiring new ways of working with materials and suppliers.
Green
Take urgent action to combat climate change and its impacts
With climate change, the construction industry is part of the problem and part of the solution. Skanska con-tributes to building a better society by striving to reduce carbon emissions from the Group’s operations, as well as providing customers with resilient and low-carbon solutions. The aim is reduced carbon footprints, both for Skanska and customers.
In Solna, Sweden, New Karolinska Solna is a hospital public-private partnership (PPP) with a Skanska con-sortium handling financing, design, construction and maintenance. To achieve a low environmental impact, it will produce only minor carbon dioxide emissions from energy consumption. Partly due to using geothermal heating and cooling installations, the energy consumption will be 45 percent less than the Swedish energy code. All electricity will be 100 percent renewable electricity generated off site.
Green
Skanska Annual Report 201782 Report of the Directors
Risk area and description Potential Impacts Mitigation
Skanska’s sustainability focus area
Health and safetyInjuries and ill health regarding people at Skanska sites, or people affected by Skanska work activi-ties.
Multiple fatalities, life-changing injuries, and injuries and long-term ill health that reduce life expectancy or the quality of life.
Skanska’s safety policy describes the expected roles of all industry participants to help achieve injury-free environments.
Skanska’s Global Safety Standards provide minimum expected behaviors for all Skanska workplaces.
Construction Business Units have safety management systems that comply with the OHSAS 18001 interna-tional occupational health and safety management system standard. This provides control over operational safety risks.
Safety
Anti-corruption and bribery mattersBribery, corruption, money launder-ing and breach of Skanska’s values and ethics. Bribery and corruption are among Skanska’s top risks.
Fines, penalties and criminal and civil charges. Delisting from public procurement in some markets. Damaged reputation and lost trust as a responsible company.
The Code of Conduct, anti-corruption policy and other policies provide clear directions to employees, and related training provides instruction on appropriate behaviors.
Skanska encourages employees to have everyday discussions around the Group’s values. Short videos depicting situations encountered by employees support this activity.
Due diligence deepens Skanska’s knowledge of suppli-ers, subcontractors and other partners. Particular atten-tion is given to those representing Skanska as interme-diaries. Sellers and buyers of land and real property are also scrutinized, including identifying funding sources.
Ethics
Environment Major environmental incident in operations or supply chain.
Pollution or negative impact on the environment.
Inefficient uses of energy, materials, waste and water.
Physical risks caused by extreme weather due to climate change.
Damaged reputation and loss of license to operate.
Operational inefficiency, increasing costs and decreasing profits.
Operational costs or delays due to extreme weather conditions.
Skanska’s Code of Conduct and Environmental Policy, enabled by the Group’s environmental management system, guide actions relating to environmental risks and secure legal compliance. Environmental specialists at Group and Business Unit levels support line manage-ment with their responsibility for securing compliance and achieving Group environmental expectations, which go beyond compliance, and retaining ISO 14001 certifi-cation. Also, Skanska engages with suppliers to reduce risks of supply chain environmental breaches. Employees are trained on proper environmental prac-tices and are immersed in activities that lift Skanska’s Care for Life value.
The Skanska Color Palette secures a strategic approach to future-proofing projects regarding resource efficiency (energy, carbon, materials and water).
Green
Sustainability risksSkanska prioritizes understanding the Group’s main sustainability opportunities and risks. For each sustainability risk, comprehensive management and mitigation measures are implemented and regu-larly updated.
Skanska Annual Report 2017 83Report of the Directors
Risk area and description Potential Impacts Mitigation
Skanska’s sustainability focus area
Diversity and inclusionLow diversity among employees and subcontractors – similar backgrounds in terms of gender, age, ethnicity, family situation, educational background, work experience and per-sonality.
Non-inclusive, even explicitly excluding, workplace culture, re-sulting in exclusionary experiences and cases of discrimination and harassment.
Difficulties attracting, recruiting and/or retaining employees with needed competencies.
Inability to meet customer and community expectations regarding diversity and inclusion, reducing Skanska’s ability to secure project assignments.
Damaged reputation from harassment and discrimination cases.
Decreased employee engagement and productivity due to non-inclusive behaviors and experiences.
Diversity and inclusion is integrated in Skanska’s 2020 Profit with Purpose Business Plan, and the Group’s values, sustainability agenda and Code of Conduct.
The Group-wide diversity and inclusion vision and strategy are activated through a Group-wide network with local action groups and action plans.
Diversity and inclusion is integrated into employee attraction and recruitment initiatives, and employee performance review processes. Also, it is addressed in employee onboarding programs and leadership development programs.
Skanska’s new Community Investment Guideline is well aligned with the Group’s Diversity and Inclusion vision and strategy. Supplier diversity programs support both Community Investment and Diversity and Inclusion.
Diversity and Inclusion
Human rights Human rights viola-tions, such as unfair working conditions, modern-day slavery and discrimination. Also harassment, both at Skanska sites and by any of Skan-ska’s subcontractors or suppliers.
Damaged reputation and lost trust as a responsible company. Also, financial fines and penalties, civil law-suits and criminal charges.
Skanska Code of Conduct training and the Supplier Code of Conduct guide employees and those working on behalf of Skanska to act appropriately regarding human rights. Other control measures include knowing the background of suppliers and regulating project site access.
The Code of Conduct Hotline provides an anonymous way for employees and external parties to report suspected misconduct. Every allegation is diligently investigated.
Ethics
Supply chain managementSuppliers not compli-ant with Skanska’s requirement to follow Supply Chain Code of Conduct.
Performance risks associated with each supplier’s financial condition and ability to procure material and labor.
Damaged reputation if suppliers and subcontractors act in ways not consistent with Skanska’s values.
Failure by a supplier could result in Skanska facing a financial loss, damaged reputation and inability to meet project schedule.
Skanska is increasing due diligence of suppliers and subcontractors. Actions include prequalifying suppliers based on set criteria; having the Supplier Code of Conduct as a contract attachment; and auditing suppliers. Particular attention is given to those representing Skanska as intermediaries.
Prequalification or qualification prior to award of a contract reduces performance risk.
Ethics
Skanska Annual Report 201784 Report of the Directors
EmployeesThe average number of employees in 2017 was 40,759 (42,903), of whom 9,304 (10,158) were in Sweden. Skanska prioritizes attracting, recruiting and orientation of new employees to the organization.
The Skanska employee ownership program (Seop) is aimed at attracting employees and retaining them within the Group, and creating greater affinity and dedication. All permanent employees of the Skanska Group are entitled to participate in the program. Currently 29 percent (30) of those eligible are participants.
The Group uses annual employee surveys to obtain an under-standing of job satisfaction, morale and professional development needs from the employees’ perspective. In 2017 a new Group-wide employee survey was launched to follow up and support the Profit with Purpose business plan. The survey was conducted within all Business Units for the first time in April 2017. One of the most important factors in attracting and retaining employees is the opportunity for continued professional development within the company. The Group thus strongly emphasizes creating a culture in which managers and other employees provide each other with mutual feedback, where employees can undertake new, challenging assignments, and where proficiency-raising initiatives are offered. At the Group level, the Skanska Top Executive Program (STEP) is run in collaboration with IMD business school in Switzerland and Ivey Business School in Canada.
Skanska also has a global talent program called Skanska Stretch. It is aimed at key talents who are at an early stage in their career and on their way into a management role. The program has a clear inter-national emphasis and all participants have an opportunity to work abroad after completing the program. In addition, all business units have training programs that match the needs of the respective unit, targeting employees at all levels.
The annual Talent Review process provides the basis for succes-sion planning and professional development for employees. It is uniformly implemented in all of the Group’s Business Units in order to obtain a Group-wide picture of competencies and development needs at both the individual and Business Unit level.
Skanska uses a Group-wide skills profile – Skanska Leadership Profile – for the purpose of clarifying the expectations the Group has for all employees and to provide opportunities for continuous development.
Work on Skanska Unlimited – a program aimed at increasing tal-ent exchange within the Group – continued in 2017. Employees are given an opportunity to try a 3–6 month assignment at a different Business Unit, internationally or in the same market.
For Skanska, diversity is about embracing and utilizing the abilities of every individual. Skanska’s actions are based on the conviction that the company’s competitiveness is enhanced when its employees are satisfied with their work situation and have the opportunity for professional development regardless of gender, ethnicity or educational background. Currently, a significant number of women are active at the project level within the Group, but the percentage of women in management positions is still too low. Efforts to increase diversity are under way, both at the Group level and at every Business Unit. The Group works continuously to set diversity targets for its Business Units, for example to increase the percentage of new female recruits or to raise the level of knowledge and awareness about diversity within the organization.
Remuneration to senior executivesFor information about the most recently approved guidelines for determining salaries and other remuneration for the President and CEO and other senior executives, see Note 37 Remuneration to senior executives and Board members.
In April 2018 the Board will present a proposal to the Annual General Meeting to retain the current guidelines for salaries and other remuneration of senior executives.
The Board’s proposal for salaries and other remuneration to senior executives for approval by the 2018 Annual General MeetingRemuneration for senior executives of Skanska AB is to consist of a fixed salary, possible variable remuneration, other customary ben-efits, and pension. The senior executives include the President and CEO and the other members of the Group Leadership Team. The combined remuneration for each executive must be market-based and competitive in the job market in which the executive is located, and outstanding performance is to be reflected in the total remu-neration package.
Fixed salary and variable remuneration are to be linked to the level of responsibility and authority of the executive. The variable remuneration is to be payable in cash and/or shares, and it is to have a ceiling and be related to the fixed salary. To receive shares a three-year vesting period is required and the shares are to be part of a long-term incentive program. Variable remuneration is to be based on performance in relation to established targets and designed to achieve better alignment between the interests of the executive and of the company’s shareholders. The terms of variable remuneration should be designed so that if exceptional economic conditions exist, the Board has the ability to limit or refrain from paying variable remuneration if such payment is deemed unreasonable and incom-patible with the company’s general responsibility to shareholders, employees and other stakeholders. With respect to the annual bonus, the Board has the ability to limit or refrain from paying this variable remuneration if it deems such action reasonable based on other factors.
If a member of the Board performs work on behalf of the company in addition to his or her assignment on the Board, a consultant fee and other compensation for such work may be payable.
In case of termination or resignation, the normal notice period is six months combined with severance pay equivalent to a maximum of 18 months of fixed salary or, alternatively, a notice period of a maximum of 24 months.
Pension benefits are to be in the form of either defined-benefit or defined-contribution plans, or a combination of both, and entitle the executive to receive a pension from the age of 65. In individual cases, however, the retirement age may be as low as 60. To earn full defined-benefit pension, the individual is required to have been employed for as long a period as is required under the company’s general pension plan in each respective country. Variable remuner-ation is not pensionable except in cases where this is stipulated in the rules for a general pension plan (e.g. Sweden’s ITP occupational pension plan.)
The Board of Directors may deviate from these guidelines if there are special reasons to do so in an individual case.
A proposal for the President and CEO’s salary and other remuner-ation is prepared by the Compensation Committee and a decision is taken by the Board. The salaries and other remuneration for other senior executives are determined by the Compensation Committee.
Skanska Annual Report 2017 85Report of the Directors
Skanska employee ownership program (Seop)The purpose of the Seop is to strengthen the Group’s ability to retain and recruit qualified personnel and to align employees more closely to the company and its shareholders.
The program provides employees with the opportunity to invest in Skanska shares while receiving incentives in the form of possible allotment of additional shares.
This allotment is predominantly performance-based. Shares are only allotted after a three-year vesting period. To be able to earn matching shares and performance shares, a person must be employed during the entire lock-up period and have retained the shares purchased within the framework of the program. Under Seop 3, which ran during the period 2014–2016, matching shares and performance shares were allotted in 2017 for the shares in which employees had invested in 2014 and which they had retained for the three-year lock-up period.
In 2017 Seop 4 continued, running for the period 2017–2019. Seop 4 is essentially identical to Seop 3.
The accounting principles applied for the employee ownership programs can be found in Note 1 IFRS 2 Share-based Payment.
Employee-related expenses for Skanska employee ownership program (Seop)
SEK M Seop 3 Seop 4Total for
programs
Employee-related costsFor share-award Programs 1
Investment years 2014–2016 2017–2019
Total estimated costfor the programs 2 862 311 1,173
Expensed at beginning of period –420 0 –420
Cost for the period –234 –63 –297
Total expensed at end of period –654 –63 –717
Remaining to be expensed 208 248 456
Of which expensed in:
2018 155 103 258
2019 53 102 155
2020 or later 0 43 43
Total 208 248 456
Share awards earned through December 2017
Number of shares 2,146,781 287,989 2,434,770
Dilution through December 2017, % 0,52 0,07 0,59
Maximum dilution at end of programs, % 0,79 0,36 1,15
Share awards earned at end of programs
Number of shares 5,008,327 1,473,955 6,482,282
Series B shares allotted 1,754,616 0 1,754,616
Total unallocated shares 3,253,711 1,473,955 4,727,666
Series B treasury shares 11,190,028
1 Excluding social insurance contributions.2 For investments made up to now and until December 2017.
Information on sharesIn order to ensure allotment of shares to the participants in Skanska’s employee ownership programs, the 2017 Annual General Meeting authorized the Board of Directors to repurchase treasury shares. According to this decision the company may buy a maxi-mum of 3,000,000 Series B shares to ensure allotment of shares to participants in Seop 4.
During the year, Skanska repurchased a total of 2,350,000 shares at an average price of SEK 187.25. The average price of all repur-chased shares is SEK 137.31. The quota value of the repurchased shares is SEK 3.00 per share, totaling SEK 7.0 M, and the shares represent 0.6 percent of the total share capital. The cost of acquir-ing these shares amounted to SEK 440 M. During the year 1,754,616 shares were allotted to the employees participating in the employee ownership program. The quota value of the repur-chased shares is SEK 3.00 per share, totaling SEK 5.3 M, and the shares represent 0.4 percent of the total share capital. The num-ber of treasury shares held as of December 31, 2017 amounted to 11,190,028. The quota value of these shares is SEK 3.00 per share, totaling SEK 33.6 M, and the shares represent 2.7 percent of the total share capital. The cost of acquiring the shares amounted to SEK 1.5 billion.
Proposed dividendThe Board of Directors proposes a regular dividend of SEK 8.25 (8.25) per share. The proposal is equivalent to a regular dividend totaling SEK 3,372 M (3,380). The Board proposes April 17 as the record date for the dividend. The Board has determined that the Group’s financial position, the outlook for the coming year and investment opportunities, as well as circumstances in general, warrant retaining a dividend of SEK 8.25 per share.
No dividend is paid for the Parent Company’s holding of Series B treasury shares. The total dividend amount may change by the record date, depending on repurchases of shares and the transfer of shares to participants in long-term employee ownership programs.
The Board’s justification for its proposed dividendThe nature and scale of Skanska’s operations are described in the Articles of Association and this Annual Report. The operations carried out within the Group do not pose any risks beyond those that occur or can be assumed to occur in the industry, or the risks that are otherwise associated with conducting business activities. The Group’s dependence on the general economic situation does not deviate from what is otherwise the case in the industry.
The Group’s equity/assets ratio amounts to 24.8 percent (25.8). The proposed dividend does not jeopardize the investments that are considered necessary or investments to support the Group’s continued development. The Group’s financial position does not give rise to any conclusion other than that the Group can continue to develop its operations and that the company can be expected to meet its short-term and long-term obligations.
With reference to the above and what has otherwise come to the Board’s attention, the Board has concluded that the dividend is jus-tified based on what is required in terms of the size of the company’s and the Group’s equity and the Group’s consolidation requirements, liquidity and position in general, based on the nature and scale of the Group’s operations. Future profits are expected to cover both the growth of business operations and the growth of the regular dividend.
Skanska Annual Report 201786 Report of the Directors
Research and innovationThe Research & Innovation department is the corporate hub for knowledge transfer of technical solutions and innovations between the various Skanska units.
It provides technical input to inform Skanska’s risk management process in order to reduce risk exposure arising from complex and wide-span structures, potential system errors and the use of new, untested materials. It also provides technical support for problem solving and for handling financial claims and disputes, through a coordinated internal and external network of experts.
In addition, the department oversees the research and innovation activity within Skanska’s network, working proactively to identify new technical solutions and improve efficiency in methods and processes.
The capacity for innovation is crucial in order for Skanska to stay competitive and deliver solutions that meet the needs of today and tomorrow. Through innovation, Skanska identifies and develops new technical products, services and processes, improving the company’s competitiveness and generating even greater value for Skanska and its clients.
A main priority over the past year was the development of a new strategy for the Group’s future R&D work and providing technical support within the framework of Skanska’s 2016–2020 business plan, with an emphasis on operational efficiency. Skanska’s techni-cal focus areas in 2017 included BIM, automation and robotics, self-driving vehicles, industrialization, materials, drones, 3D printers, energy, energy storage and other key areas such as climate change, sustainability and safety.
Skanska actively collaborates with around 25 universities in the company’s home markets and currently has five associate professors in the fields of construction automation, energy, concrete, tunnel-ing and bridge building. In 2017 Skanska ran and supported an ini-tiative in an entirely new area – construction automation. With several industry partners and Mälardalen University (MDH), including its Robotdalen initiative, Skanska applied for and received funding from the Knowledge Foundation for a new research department with a total of 20 PhD students at MDH. The research department provides the possibility of radically changing the construction sector – from a trade to a highly efficient industry.
Skanska Annual Report 2017 87Report of the Directors
Consolidated income statement
SEK M Note 2017 2016
Revenue 8, 9 157,877 145,365
Cost of sales 9 –145,103 –131,119
Gross income 12,774 14,246
Selling and administrative expenses 11 –9,851 –9,152
Income from joint ventures and associated companies 20 1,655 2,126
Operating income 10, 12, 13, 22, 36, 38, 40 4,578 7,220
Financial income 170 119
Financial expenses –125 –238
Financial items 14 45 –119
Income after financial items 15 4,623 7,101
Taxes 16 –512 –1,366
Profit for the year 4,111 5,735
Profit for the year attributable to
Equity holders 4,095 5,722
Non-controlling interests 16 13
Earnings per share, SEK 26, 43 10,00 13,96
Earnings per share after dilution, SEK 26, 43 9,94 13,88
Proposed regular dividend per share, SEK 8,25 8,25
Skanska Annual Report 201788 Report of the Directors
Consolidated statement of comprehensive income
SEK M 2017 2016
Profit for the year 4,111 5,735
Other comprehensive income
Items that will not be reclassified to profit or loss
or the period
Remeasurement of defined-benefit plans 1 –399 –1,127
Tax related to items that will not be reclassified
to profit or loss for the period 69 189
–330 –938
Items that have been or will be reclassified to
profit or loss for the period
Translation differences attributable to equity holders –599 1,165
Translation differences attributable to non-controlling
interests 8 8
Hedging of exchange rate risk in foreign operations –125 36
Effects of cash flow hedges 138 31
Share of other comprehensive income for joint ventures
and associated companies 83 855
Tax related to items that have been or will be reclassified
to profit or loss for the period –25 –4
–520 2,091
Other comprehensive income after tax –850 1,153
Total comprehensive income for the year 3,261 6,888
Total comprehensive income for the year attributable to
Equity holders 3,237 6,867
Non-controlling interests 24 21
1 Effects of social insurance contributions including special employer’s contribution are included
–65 –105
See also Note 26.
Skanska Annual Report 2017 89Report of the Directors
Consolidated statement of financial position
SEK M Note Dec 31, 2017 Dec 31, 2016
ASSETS
Non-current assets
Property, plant and equipment 17, 40 6,874 6,837
Goodwill 18 4,554 5,270
Other intangible assets 19 962 1,034
Investments in joint ventures and associated companies 20 3,314 4,160
Financial non-current assets 21 2,276 1,016
Deferred tax assets 16 1,757 1,649
Total non-current assets 19,737 19,966
Current assets
Current-asset properties 22 39,010 33,678
Inventories 23 1,058 1,042
Financial current assets 21 6,671 10,095
Tax assets 16 1,188 784
Gross amount due from customers for contract work 9 6,997 5,751
Other operating receivables 24 27,778 29,759
Cash 25 6,998 5,430
Total current assets 89,700 86,539
TOTAL ASSETS 32 109,437 106,505
of which interest-bearing financial non-current assets 31 2,228 970
of which interest-bearing current assets 31 13,572 15,348
15,800 16,318
Skanska Annual Report 201790 Report of the Directors
Consolidated statement of financial position
SEK M Note Dec 31, 2017 Dec 31, 2016
EQUITY 26
Share capital 1,260 1,260
Paid-in capital 2,528 2,231
Reserves 1,144 1,672
Retained earnings 22,132 22,187
Equity attributable to equity holders 27,064 27,350
Non-controlling interests 121 156
TOTAL EQUITY 27,185 27,506
LIABILITIES
Non-current liabilities
Financial non-current liabilities 27 3,857 3,656
Pensions 28 5,603 4,901
Deferred tax liabilities 16 1,235 1,491
Non-current provisions 29 0 1
Total non-current liabilities 10,695 10,049
Current liabilities
Financial current liabilities 27 7,624 6,681
Tax liabilities 16 312 489
Current provisions 29 8,557 7,227
Gross amount due to customers for contract work 9 16,636 18,473
Other operating liabilities 30 38,428 36,080
Total current liabilities 71,557 68,950
TOTAL LIABILITIES 82,252 78,999
TOTAL EQUITY AND LIABILITIES 32 109,437 106,505
of which interest-bearing financial liabilities 31 11,323 10,172
of which interest-bearing pensions and provisions 31 5,603 4,927
16,926 15,099
Information about the Group’s pledged assets and contingent liabilities can be found in Note 33.
Skanska Annual Report 2017 91Report of the Directors
Consolidated statement of changes in equity
SEK M Share capitalPaid-incapital
Translationreserve
Equity attributable to equity holders
Non-controlling
interestsTotal
equity
Cash flowhedge
reserveRetainedearnings Total
Equity, December 31, 2016 1,260 1,959 1,282 –1,693 21,271 24,079 127 24,206
Profit for the year 5,722 5,722 13 5,735
Other comprehensive income
for the year 1,201 882 –938 1,145 8 1,153
Dividend to shareholders –3,075 –3,075 –6 –3,081
Change in Group structure 14 14
Repurchase of 2,340,000 Series
B-shares –793 –793 –793
Change in share-based payments
for the year 272 272 272
Equity, December 31, 2016/Equity, January 1, 2017 1,260 2,231 2,483 –811 22,187 27,350 156 27,506
Profit for the year 4,095 4,095 16 4,111
Other comprehensive income
for the year –724 196 –330 –858 8 –850
Dividend to shareholders –3,380 –3,380 –59 –3,439
Repurchase of 4,345,000 Series B
shares –440 –440 –440
Change in share-based payments
for the year 297 297 297
Equity, December 31, 2017 1,260 2,528 1,759 –615 22,132 27,064 121 27,185
See also Note 26.
Skanska Annual Report 201792 Report of the Directors
Consolidated cash flow statement
SEK M 2017 2016
Operating activities
Operating income 4,578 7,220
Adjustments for items not included in cash flow –3,521 –4,918
Income tax paid –860 –1,202
Cash flow from operating activities before
change in working capital 197 1,100
Cash flow from change in working capital
Investments in current-asset properties –20,792 –17,128
Divestments of current-asset properties 19,575 16,473
Change in inventories and operating receivables 370 –4,093
Change in operating liabilities 3,496 2,765
Cash flow from change in working capital 2,649 –1,983
Cash flow from operating activities 2,846 –883
Investing activities
Investments in intangible assets –255 –394
Investments in property, plant and equipment –1,876 –1,636
Investments in Infrastructure Development
assets –449 –1,336
Investments in shares –154 –325
Increase in interest-bearing receivables,
loans provided –1,052 –2,559
Sale of operations 0 862
Divestments of intangible assets 1 2
Divestments of property, plant and equipment 213 411
Divestments of Infrastructure Development
assets 1,950 3,102
Divestments of shares 458 16
Decrease in interest-bearing receivables,
repayments of loans provided 2,786 299
Income tax paid –32 –35
Cash flow from investing activities 1,590 –1,593
Financing activities
Net interest items 80 2
Other financial items 173 –110
Borrowings 2,677 1,302
Repayment of debt –1,792 –1,442
Dividend to shareholders –3,380 –3,075
Shares repurchased –440 –793
Dividend to non-controlling interests –59 –6
Income tax paid –76 32
Cash flow from financing activities –2,817 –4,090
Cash flow for the year 1,619 –6,566
Cash and cash equivalents, January 1 5,430 11,840
Translation differences in cash and
cash equivalents –51 156
Cash and cash equivalents, December 31 6,998 5,430
Change in interest-bearing net receivables/liabilities
SEK M 2017 2016
Interest-bearing net receivables/net liabilities, January 1 1,219 6,317
Cash flow from operating activities 2,846 –883
Cash flow from investing activities excluding
change in interest-bearing receivables –144 667
Cash flow from financing activities excluding
change in interest-bearing liabilities –3,702 –3,950
Change in pension liability –334 –1,022
Net receivable/net liability acquired/divested 0 –663
Translation differences –941 972
Other –70 –219
Interest-bearing net receivables/net liabilities, December 31 –1,126 1,219
See also Note 35.
Skanska Annual Report 2017 93Report of the Directors
Consolidated operating cash flow statement and change in interest-bearing net receivables/net liabilities
SEK M 2017 2016
Construction
Cash flow from business operations 3,735 4,925
Change in working capital 226 1,051
Net divestments (+)/investments (–) –1,825 –1,414
Cash flow adjustment 1 0 0
Total Construction 2,136 4,562
Residential Development
Cash flow from business operations –692 –677
Change in working capital 1,008 1,198
Net divestments (+) / investments (–) 680 –1,631
Cash flow adjustment 1 233 –100
Total Residential Development 1,229 –1,210
Commercial Property Development
Cash flow from business operations –868 –706
Change in working capital –400 –664
Net divestments (+) / investments (–) –1,375 679
Cash flow adjustment 1 –476 4
Total Commercial Property Development –3,119 –687
Infrastructure Development
Cash flow from business operations –261 154
Change in working capital 2,856 –2,965
Net divestments (+) / investments (–) 1,501 1,766
Cash flow adjustment 1 0 0
Total Infrastructure Development 4,096 –1,045
Central and eliminations
Cash flow from business operations –857 –1,394
Change in working capital 176 52
Net divestments (+) / investments (–) –67 –119
Cash flow adjustment 1 0 0
Total central and eliminations –748 –1,461
Total cash flow from business operations 1,057 2,302
Total change in working capital 3,866 –1,328
Net divestments (+) / investments (–) –1,086 –719
Total cash flow adjustment 1 –243 –96
Total cash flow from business operations before taxes paid 3,594 159
SEK M 2017 2016
Taxes paid in business operations –892 –1,237
Cash flow from business operations
including taxes paid 2,702 –1,078
Net interest items and other net financial items 253 –108
Taxes paid in financing operations –76 32
Cash flow from financing activities 177 –76
Cash flow from operations 2,879 –1,154
Strategic net divestments (+) /investments (–) 0 862
Dividend etc. 2 –3,879 –3,874
Cash flow before change in interest-bearing receivables and liabilities –1,000 –4,166
Change in interest-bearing receivables
and liabilities 2,619 –2,400
Cash flow for the year 1,619 –6,566
Cash and cash equivalents, January 1 5,430 11,840
Translation differences in cash and
cash equivalents –51 156
Cash and cash equivalents, December 31 6,998 5,430
1 Refers to payments made during the year in question related to divestments/investments in prior years, and unpaid divestments/investments related to the year in question.
2 Of which repurchases of shares –440 –793
See also Note 35.
Consolidated cash flow statement, specification
Skanska Annual Report 201794 Report of the Directors
Parent Company income statement
SEK M Not 2017 2016
Revenue 46 698 674
Gross income 698 674
Selling and administrative expenses –791 –752
Operating income 49,,50,,62 –93 –78
Income from holdings in Group companies 47 4,466 3,597
Income from other financial non-current assets 47 0 0
Interest expense and similar items 47 –63 –75
Income after financial items 4,310 3,444
Tax on profit for the year 48 11 –15
Profit for the year 1 4,321 3,429
1 Coincides with comprehensive income for the year.
Skanska Annual Report 2017 95Report of the Directors
Parent Company balance sheet
SEK M NoteDec 31,
2017Dec 31,
2016
ASSETS
Intangible non-current assets 49 16 19
Property, plant and equipment 50
Plant and equipment 2 2
Total property, plant and equipment 2 2
Financial non-current assets 51
Holdings in Group companies 52 11 206 11 094
Holdings in joint arrangements 53 2 2
Other non-current holdings of securities 0 0
Receivables in Group companies 63 247 253
Deferred tax assets 48 77 60
Other non-current receivables 51 107 95
Total financial non-current assets 11 639 11 504
Total non-current assets 11 657 11 525
Current receivables
Current receivables in Group companies 63 18 15
Tax assets 8 15
Other current receivables 124 128
Prepaid expenses and accrued income 54 13 9
Total current receivables 163 167
Total current assets 163 167
ASSETS 59 11 820 11 692
SEK M NoteDec 31,
2017Dec 31,
2016
EQUITY AND LIABILITIES
Equity 55
Share capital 1 260 1 260
Restricted reserves 598 598
Restricted equity 1 858 1 858
Retained earnings 1 034 1 073
Profit for the year 4 321 3 429
Unrestricted equity 5 355 4 502
Total equity 7 213 6 360
Provisions 56
Provisions for pensions
and similar obligations 57 174 172
Other provisions 133 111
Total provisions 307 283
Non-current interest-bearing liabilities 58
Liabilities to Group companies 63 4 177 4 918
Total non-current interest-bearing liabilities 4 177 4 918
Current liabilities 58
Trade accounts payable 20 28
Liabilities to Group companies 63 26 26
Other liabilities 5 12
Accrued expenses and prepaid income 72 65
Total current liabilities 123 131
EQUITY AND LIABILITIES 59 11 820 11 692
Skanska Annual Report 201796 Report of the Directors
Parent Company statement of changes in equity
SEK M Share capitalStatutory
reserveUnrestricted
equity Total equity
Equity, January 1, 2016 1,260 598 4,616 6,474
Repurchases of 2 340 000 Series B shares –793 –793
Compensation from subsidiaries for shares issued 53 53
Dividend –3,075 –3,075
Share-based payments 272 272
Profit for 2016 1 3,429 3,429
Equity, December 31, 2016/Equity, January 1, 2017 1,260 598 4,502 6,360
Repurchases of 4,345,000,Series B shares –440 –440
Compensation from subsidiaries for shares issued under employee ownership programs 55 55
Dividend –3,380 –3,380
Share-based payments 297 297
Profit for 2017 1 4,321 4,321
Equity, December 31, 2017 1,260 598 5,355 7,213
1 Coincides with comprehensive income for the year.
See also Note 55.
Skanska Annual Report 2017 97Report of the Directors
Parent Company cash flow statement
See also Note 61.
SEK M 2017 2016
Operating activities
Operating income –93 –78
Adjustments for items not included in cash flow 25 26
Paid income tax –14 –18
Cash flow from operating activities before change in working capital –82 –70
Cash flow from change in working capitalChange in operating receivables –3 10
Change in operating liabilities 17 –17
Cash flow from change in working capital 14 –7
Cash flow from operating activities –68 –77
Investing activities
Acquisition of intangible assets 0 –19
Increase in interest-bearing receivables, loans provided –12 –37
Decrease in interest-bearing receivables, loans provided 6 58
Cash flow from investing activities –6 2
Financing activities
Net interest items –63 –75
Dividends received 4,466 3,597
Borrowings 0 149
Repayment of debt –741 0
Dividend paid –3,380 –3,075
Repurchase of shares –440 –793
Paid income tax 14 17
Payments from subsidiaries for employee ownership programs 218 255
Cash flow from financing activities 74 75
Cash flow for the year 0 0
Cash and cash equivalents, January 1 0 0
Cash and cash equivalents, December 31 0 0
Skanska Annual Report 201798 Notes including accounting and valuation principles
Notes including accounting and valuation principles
Parent Company Page
Note 01 Parent Company accounting and valuation principles 93
Note 45 Financial instruments 155
Note 46 Revenue 155
Note 47 Financial items 155
Note 48 Income taxes 156
Note 49 Intangible assets 156
Note 50 Property, plant and equipment 156
Note 51 Non-current financial assets 157
Note 52 Holdings in Group companies 157
Note 53 Holdings in joint arrangements 158
Note 54 Prepaid expenses and accrued income 158
Note 55 Equity 158
Note 56 Provisions 158
Note 57 Provisions for pensions and similar obligations 159
Note 58 Liabilities 159
Note 59Expected recovery period of assets, provisions and liabilities 160
Note 60 Assets pledged and contingent liabilities 161
Note 61 Cash flow statement 161
Note 62 Personnel 161
Note 63 Related party disclosures 162
Note 64 Disclosures in compliance with the Annual Accounts Act, Chapter 6, Section 2 a 162
Note 65 Supplementary information 162
Note 66 Events after the reporting period 162
Note 67 Allocation of earnings 163
Group Page
Note 01 Consolidated accounting and valuation principles 99
Note 02 Key estimates and judgments 110
Note 03 Effects of changes in accounting principles 111
Note 04 Operating segments 111
Note 05 Non-current assets held for sale and discontinued operations 114
Note 06Note 6 Financial instruments and financial risk management 115
Note 07 Business combinations 125
Note 08 Revenue 125
Note 09 Construction contracts 125
Note 10 Operating expenses by category of expense 126
Note 11 Selling and administrative expenses 126
Note 12 Depreciation/amortization 126
Note 13 Impairment losses/reversals of impairment losses 127
Note 14 Financial items 128
Note 15 Borrowing costs 128
Note 16 Income taxes 128
Note 17 Property, plant and equipment 131
Note 18 Goodwill 132
Note 19 Intangible assets 133
Note 20 A Subsidiaries 134
Note 20 B Investments in joint ventures and associated companies 135
Note 20 C Joint operations 139
Note 21 Financial assets 140
Note 22 Current-asset properties/project development 141
Note 23 Inventories etc. 142
Note 24 Other operating receivables 142
Note 25 Cash and bank balances 142
Note 26 Equity/earnings per share 143
Note 27 Financial liabilities 145
Note 28 Pensions 145
Note 29 Provisions 149
Note 30 Other operating liabilities 149
Note 31Specification of interest-bearing net receivables/net liabili-ties per asset and liability 150
Note 32 Expected recovery periods of assets and liabilities 151
Note 33 Assets pledged, contingent liabilities and contingent assets 152
Amounts in millions of Swedish kronor (SEK M) unless otherwise specified. Income is reported in positive figures and expenses in negative figures. Both assets and liabilities are reported in positive figures. Interest-bearing net receivables/net liabilities are reported in positive figures if they are receivables and negative figures if they are liabilities. Accumulated depreciation/amortization and accumulated impairment losses are reported in negative figures.
Table of contents, notes
Group
Note 34Foreign exchange rates and effect of changes in foreign exchange rates 153
Note 35 Cash flow statement 155
Note 36 Personnel 157
Note 37 Senior executive remuneration and Board fees 158
Note 38 Fees and other remuneration to auditors 162
Note 39 Related party disclosures 162
Note 40 Leases 163
Note 41 Events after the reporting period 163
Note 42 Five-year Group financial summary 164
Note 43 Definitions 168
Note 44 Definitions – Non-IFRS key performance indicators 170
Skanska Annual Report 2017 99Notes including accounting and valuation principles
Note 1. Consolidated accounting and valuation principles
Conformity with laws and standards In compliance with the ordinance approved by the European Union (EU) on the
application of international accounting standards, the consolidated financial
statements have been prepared according to the International Financial Report-
ing Standards (IFRS) and International Accounting Standards (IAS) issued by the
International Accounting Standards Board (IASB), as well as the interpretations by
the IFRS Interpretations Committee and its predecessor, the Standing Interpreta-
tions Committee (SIC), to the extent these standards and interpretations have
been approved by the EU. In addition, the Swedish Financial Reporting Board’s
Recommendation RFR 1 “Supplementary Accounting Rules for Groups” has been
applied, as have the Statements of the Swedish Financial Reporting Board.
The Parent Company applies the same accounting principles as the Group,
except in the cases indicated below in the section “Parent Company accounting
and valuation principles.”
The Parent Company’s annual accounts and the consolidated annual accounts
were approved for issuance by the Board of Directors on January 31, 2018. The
Parent Company income statement and balance sheet and the consolidated
income statement and statement of financial position will be subject to adoption
by the Annual General Meeting on April 13, 2018.
Conditions when preparing the Group’s financial reportsThe functional currency of the Parent Company is Swedish crowns or kronor (SEK),
which is also the reporting currency of the Parent Company and of the Group.
The financial reports are therefore presented in Swedish kronor. All amounts are
rounded off to the nearest million, unless otherwise stated.
Preparing the financial reports in compliance with IFRS requires management
to make judgments and estimates, and to make assumptions that affect the
application of the accounting principles and the recognized amounts of assets,
liabilities, revenue and expenses. Actual outcomes may deviate from these esti-
mates and judgments.
Estimates and assumptions are reviewed regularly. Changes in estimates are
recognized in the period the change is made if the change only affects this period,
or in the period the change is made and future periods if the change affects both
the period in question and future periods.
Judgments made by management when applying IFRS with a substantial
impact on the financial reports and estimates that may lead to significant adjust-
ments in the financial reports of subsequent years are described in more detail in
Note 2.
The accounting principles for the Group described below have been applied
consistently for all periods that are presented in the Group’s financial reports,
unless otherwise indicated below. The accounting principles for the Group have
been applied consistently in reporting and consolidation of the Parent Company,
subsidiaries, associated companies and joint arrangements.
New standards and interpretationsThe disclosure requirements in IAS 7 Statement of Cash Flows have changed and
now include information on changes in liabilities relating to financing activities.
Information on this is provided in Note 35.
IAS 12 Income Taxes has been changed and clarifies that when an entity rec-
ognizes deferred tax assets it must take into account any limitation on the ability
to utilize deductible temporary differences, and provides guidance on how to
estimate future taxable profit. This is not expected to have any material effect on
Skanska’s financial statements.
Early adoption of new or revised IFRS and interpretationsThere has been no early adoption of new or revised IFRS or interpretations.
New standards and amendments of standards that have not yet begun to be appliedTwo new standards IFRS 15 and IFRS 9 are effective from January 1, 2018.
The standard IFRS 15 Revenue from Contracts with Customers mainly concerns
how revenue from contracts with customers, excluding leases, is to be reported
and how payment from customers is to be measured. If a customer contract con-
tains more than one performance obligation, the price for each performance ob-
ligation is to be determined and the revenue recognized when the obligation has
been satisfied, either over time or at a point in time. Skanska’s client contracts are
usually of the type that do not require categorization according to the standard
into two or more performance obligations. Revenue from construction operations
will continue to be recognized according to the percentage-of-completion method.
As previously, sales of properties are recognized when the purchaser takes
possession of the property. IFRS 15 requires more detailed disclosures. Skanska
is implementing the standard with full retrospective effect. There is no material
effect on revenue and expenses. The only material effect on Skanska’s financial
statements is a reclassification from gross amount due to customers for contract
work from other operating liabilities to loss reserves in the line item “Current
provisions.” The reclassifications break down by quarter as follows:
January 1, 2017
March 31, 2017
June 30, 2017
September 30,
2017December
31, 2017
Gross amount due to customers for contract work –151 –239 –275 –282 –370
Trade and other payables –236 –244 –256 –244 –204
Provision for losses 387 483 531 526 574
IFRS 15 does not require any change to segment reporting for Residential Devel-
opment and Commercial Property Development.
The standard IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments:
Recognition and Measurement. The new standard is more principle-based and
contains new principles for classification and measurement of financial instruments,
a forward-looking impairment model for financial instruments and a revised
approach to hedge accounting. In the same way as in IAS 39, the new rules for
classification and measurement require financial assets to be classified in different
categories, so that some are measured at amortized cost and some at fair value.
IFRS 9 introduces other categories than those in IAS 39. The classification in IFRS
9 is based on the instrument’s contractual cash flow and on the entity’s business
model. With respect to financial liabilities, IFRS 9 largely corresponds to IAS 39.
The model for classification and measurement does not involve any significant
change compared to today’s standard. The new impairment model brings forward
the timing of reserves for credit losses. In general Skanska’s credit risk arising
from trade receivables is limited, since construction project work is invoiced on a
continuous basis over the course of the project, and within Commercial Property
Development and Residential Development payment is made when the property
or home is handed over. Skanska applies hedge accounting to a limited extent.
The standard does not have any effects on the financial statements other than
the new impairment model for expected credit losses due to the possible future
inability of clients to pay, which is reported following the standard’s implementa-
tion on January 1, 2018. The reserve for credit losses relating to financial instru-
ments will increase initially by SEK 180 M, with an immediate effect on equity in
the amount of SEK 140 M after taking deferred tax into account. Comparison data
is not restated.
In January 2016 the IASB published the new standard IFRS 16 Leases, which
was adopted by the EU in 2017 and will be applied with effect from January 1,
2019. In contrast to the present IAS 17 Leases, under the new standard Skanska,
as the lessee in operating leases as well, must recognize operating leases in the
statement of financial position, except for limited or shorter leases. The effect
of the new standard is expected to result in an increase in total assets of around
SEK 5 to 7 billion. Lines will be added to the balance sheet for property, plant and
equipment right-of-use assets, current-asset properties right-of-use land as well
as interest-bearing liabilities. See Note 40 on future minimum lease payments for
non-cancellable operating leases. Skanska has chosen to implement the standard
retroactively with cumulative effect, i.e. without restating the comparison
periods.
IAS 1 Presentation of Financial StatementsIncome statementItems recognized as revenue are: project revenue, compensation for other services
performed, divestment of current-asset properties, deliveries of materials and
Skanska Annual Report 2017100 Notes including accounting and valuation principles
merchandise, rental income and other operating revenue. Revenue from the sale
of machinery, equipment, non-current-asset properties and intangible assets is
not included, but is instead recognized on a net basis among operating expenses
against the carrying amounts of the assets.
Items reported as cost of production include: direct and indirect manufacturing
expenses, loss risk provisions, the carrying amounts of divested current-asset
properties, bad debt losses and warranty expenses. Also included is depreciation
on property, plant and equipment used in construction and property management.
Changes in the fair value of derivatives related to operations are recognized in
operating income.
Selling and administrative expenses include customary administrative
expenses, technical expenses and selling expenses, as well as depreciation of
machinery and equipment that have been used in selling and administration pro-
cesses. Goodwill impairment losses are also reported as selling and administrative
expenses.
Profit/loss from joint ventures and associated companies is recognized sepa-
rately in the income statement, allocated between operating income (share of
income after financial items) and taxes.
Financial income and expense are recognized divided into two items: “Financial
income” and “Financial expenses.” Among items recognized under financial
income are interest income, dividends, gains on divestments of shares and other
financial items. Financial expenses include interest expense and other financial
items. Changes in the fair value of financial instruments, primarily derivatives
linked to financing activities, are recognized as a separate sub-item allocated be-
tween financial income and financial expenses. The net amount of exchange rate
differences is recognized either as financial income or financial expenses. Financial
income and expenses are described in more detail in Note 6 and in Note 14.
Comprehensive incomeAside from profit for the year, the consolidated statement of comprehensive in-
come includes the items that are included under “Other comprehensive income.”
These include translation differences, hedging of exchange rate risks in foreign
operations, remeasurement related to pension-linked assets and liabilities, effects
of cash flow hedges and tax on these items.
Statement of financial positionAssetsAssets are allocated between current assets and non-current assets. An asset is
regarded as a current asset if it is expected to be realized within 12 months of the
closing day or within the company’s operating cycle. The operating cycle is the
period from the signing of a contract until the company receives cash payment
following a final inspection or delivery of goods (including properties). Since the
Group executes large contracting projects and project development, the operating
cycle criterion means that many more assets are designated as current assets than
if the only criterion were within 12 months.
Cash and cash equivalents consist of cash and immediately available deposits at
banks and equivalent institutions, plus short-term liquid investments with a ma-
turity from the acquisition date of less than three months that are subject to only
an insignificant risk of fluctuation in value. Checks that have been issued reduce
liquid assets only when cashed. Cash and cash equivalents that cannot be used
freely are reported as current assets (current receivables) if the restriction will cease
within 12 months from the closing day. In other cases, cash and cash equivalents
are reported as non-current assets. Cash and cash equivalents belonging to joint
operations are cash and cash equivalents with restrictions if they are only permitted
to be used to settle the joint operations’ debts.
Assets that meet the requirements in IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations are accounted for as a separate item among current
assets.
Note 31 shows the allocation between interest-bearing and non-interest-
bearing assets.
In Note 32, assets are allocated between amounts for assets that are expected
to be recovered within 12 months of the closing day and assets that are expected
to be recovered later than 12 months of the closing day. The allocation between
non-current non-financial assets is based on expected annual depreciation. The
division for current-asset properties is mainly based on outcomes during the past
three years. This division is even more uncertain than for other assets, since the
outcome during the coming year is strongly influenced by the dates when large
individual properties are handed over.
EquityThe Group’s equity is allocated between “Share capital,” “Paid-in capital,”
“Reserves,” “Retained earnings” and “Non-controlling interests.”
Acquisitions of treasury shares are are recognized as a deduction from equity.
Proceeds from the divestment of shares are recognized as an increase in equity.
Any transaction costs are recognized directly in equity.
Dividends are recognized as a liability once the Annual General Meeting has
approved the dividend.
A description of equity, the year’s changes and disclosures concerning capital
management are provided in Note 26.
LiabilitiesLiabilities are allocated between current liabilities and non-current liabilities.
Recognized as current liabilities are liabilities that are either supposed to be paid
within 12 months of the closing day or – in the case of business-related liabilities
only – are expected to be paid within the operating cycle. Since the operating
cycle is taken into account, no non-interest-bearing liabilities, such as trade
accounts payable and accrued employee expenses, are recognized as non-current.
Liabilities that are recognized as interest-bearing due to discounting are included
among current liabilities, since they are paid within the operating cycle. Interest-
bearing liabilities can be recognized as non-current even if they fall due for pay-
ment within 12 months of the closing day if the original maturity was longer than
12 months and the company reaches an agreement on long-term refinancing of
the obligation before the end of the reporting period. Information on liabilities is
provided in Notes 27 and 30.
In Note 32, liabilities are allocated between amounts for liabilities to be paid
within 12 months of the closing day and liabilities to be paid later than 12 months
from the closing day. Note 31 also provides information about the allocation
between interest-bearing and non-interest-bearing liabilities.
IFRS 10 Consolidated Financial StatementsThe consolidated financial statements cover the accounts of the Parent Company
and the companies in which the Parent Company has a direct or indirect control-
ling interest. Under IFRS 10 a controlling interest exists when the investor has
power over the business, or when it has rights to or is exposed to variable returns
from its involvement with the investee and has the ability to affect those returns
through its power over the investee. If, on the acquisition date, a subsidiary meets
the conditions to be classified as held for sale in accordance with IFRS 5, it is
reported according to that accounting standard.
The sale of a portion of a subsidiary is recognized as a separate equity transaction
when the transaction does not result in a loss of controlling interest. If control of
an operating Group company ceases, any remaining holding is to be recognized at
fair value. Non-controlling interests may be recognized as a negative amount if a
partly-owned subsidiary is operating at a loss.
Acquired companies are consolidated from the quarter within which the acqui-
sition takes place. In a corresponding manner, divested companies are consoli-
dated up to and including the final quarter before the divestment date.
Intra-Group receivables, liabilities, revenue and expenses are eliminated in
their entirety when the consolidated financial statements are prepared.
Gains that arise from intra-Group transactions and that are unrealized from
the standpoint of the Group on the closing day are eliminated in their entirety.
Unrealized losses on intra-Group transactions are also eliminated in the same
way as unrealized gains, to the extent that the loss does not correspond to an
impairment loss.
Goodwill attributable to foreign operations is expressed in local currency.
Translation to SEK is in accordance with IAS 21.
IFRS 3 Business CombinationsThis accounting standard deals with business combinations, which are mergers
of separate entities or operations. If the acquisition does not relate to business
operations, as is normally the case when acquiring properties, IFRS 3 is not applied.
In such cases, the acquisition cost is instead allocated among the individual
identifiable assets and liabilities based on their fair values on the acquisition date,
without recognizing goodwill and any deferred tax assets/liability resulting from
the acquisition.
Acquisitions of businesses, regardless of whether the acquisitions are of
holdings in another company or a direct acquisition of assets and liabilities, are
recognized according to the purchase method of accounting. If the acquisition
Skanska Annual Report 2017 101Notes including accounting and valuation principles
is of holdings in a company, the method involves regarding the acquisition as a
transaction through which the Group indirectly acquires the assets of the subsidiary
and assumes its liabilities and contingent liabilities. The cost of the acquisition
recognized in the consolidated accounts is determined by means of an acquisition
analysis in conjunction with the business combination transaction. The analysis
establishes both the cost of the holdings or the business and the fair value of
acquired identifiable assets plus the liabilities and contingent liabilities assumed.
The difference between the cost of acquiring holdings in a subsidiary and the
net fair value of acquired assets and of the liabilities and contingent liabilities
assumed is goodwill on consolidation. If non-controlling interests remain after
the acquisition, the calculation of goodwill is normally carried out based only on
the Group’s stake in the acquired business.
Transaction costs relating to business combinations are expensed immediately.
In the case of step acquisitions, previous holdings are remeasured at fair value and
recognized in profit or loss when a controlling interest is achieved. Contingent
consideration is recognized on the acquisition date at fair value. If the amount of
the contingent consideration changes in subsequent financial statements, the
change is recognized in profit or loss.
Goodwill is carried at cost less accumulated impairment losses. Goodwill is
allocated among cash-generating units and subject to annual impairment testing
in compliance with IAS 36.
In the case of business combinations where the cost of acquisition is below the
net value of acquired assets and the liabilities and contingent liabilities assumed,
the difference is recognized directly in profit or loss.
IAS 21 The Effects of Changes in Foreign Exchange RatesForeign currency transactionsForeign currency transactions are translated into an entity’s functional currency
at the exchange rate in effect on the transaction date. Monetary assets and
liabilities in foreign currency are translated to the functional currency at the
exchange rate in effect on the closing day. Exchange rate differences that arise
in remeasurement are recognized in profit or loss. Non-monetary assets and
liabilities recognized at historic cost are translated at the exchange rate in effect
on the transaction date.
Functional currency is the currency of the primary economic environment
where the companies in the Group conduct their business.
Financial statements of foreign operationsAssets and liabilities in foreign operations, including goodwill and other consoli-
dated surpluses and deficits, are translated to Swedish kronor at the exchange
rate in effect on the closing day. Revenue and expenses in foreign operations are
translated to Swedish kronor at the average exchange rate.
Net investment in foreign operationsTranslation differences that arise in connection with translation of a foreign net
investment are recognized under “Other comprehensive income.” Foreign currency
loans and currency derivatives for hedging of translation exposure are carried at
the exchange rate on the closing day. Exchange rate differences are recognized,
taking into account the tax effect, under “Other comprehensive income.”
Hedging of translation exposure reduces the exchange rate effect when trans-
lating the financial statements of foreign operations to SEK. Any forward contract
premium is accrued until maturity and is recognized as interest income or interest
expense.
When divesting a foreign operation, the related accumulated translation
differences and accumulated exchange rate differences from any currency hedges
are transferred to the Group’s profit or loss.
IFRS 5 Non-current Assets Held for Sale and Discontinued OperationsDiscontinued operations constitute a portion of an entity’s operations that
represent a separate line of business or major operations in a geographical area
and which are part of a single coordinated plan to dispose of a separate line of
business or major operations in a geographical area, or constitute a subsidiary
acquired exclusively with a view to resale.
Classification as discontinued operations occurs upon divestment, or at an ear-
lier date when the operations meet the criteria to be classified as held for sale. A
disposal group that is to be shut down can also qualify as discontinued operations
if it meets the above size criteria.
If a non-current asset or disposal group is to be classified as held for sale, the asset
(disposal group) must be available for sale in its present condition. It must also be
highly probable that the sale will occur. In order for a sale to be highly probable, a
decision must have been made at management level, and active efforts to locate
a buyer and complete the plan must have been initiated. The asset or disposal
group must also be actively marketed at a price that is reasonable in relation to
its fair value, and it must be probable that the sale will occur within one year.
Skanska also applies the principle that with regard to a single non-current asset,
its value must exceed EUR 100 M.
No depreciation or amortization of a non-current asset takes place as long as it
is classified as held for sale.
Non-current assets classified as held for sale as well as disposal groups and
liabilities attributable to them are presented separately in the statement of
financial position.
IAS 28 Investments in Associates and Joint Ventures Companies in which the Skanska Group exercises a significant but not a controlling
influence, which is presumed to be the case when the Group’s holding is between
20 and 50 percent of the voting power, are reported as associates. In addition, it is
presumed that this ownership is one element of a long-term connection and that
the holding will not be reported as a joint arrangement.
Associated companies are recognized according to the equity method, as are
joint ventures. See IFRS 11 on joint ventures.
The equity methodFrom the date when Skanska gains a significant influence in an associated
company, or a joint controlling interest in a joint venture, holdings in associated
companies and joint ventures are recognized in the consolidated financial state-
ments according to the equity method. Any difference upon acquisition between
the cost of the holding and Skanska’s share of the net fair value of the associated
company’s or joint venture’s identifiable assets, liabilities and contingent liabilities
is recognized in compliance with IFRS 3. Under the equity method, the recognized
carrying amount of the Group’s interest in associated companies and joint ven-
tures is equivalent to the Group’s share of the associated company’s share capital,
as well as goodwill on consolidation and any other remaining consolidated
surpluses and deductions of internal profits. The Group’s share of the associated
company’s or joint venture’s income after financial items is recognized as “Income
from joint ventures and associated companies” in the income statement. Any de-
preciation, amortization and impairment losses on acquired surpluses have been
taken into account. The Group’s share of the tax expense of an associated com-
pany or joint venture is included in “Taxes.” Dividends received from an associated
company or joint venture reduce the carrying amount of the investment.
When the Group’s share of recognized losses in an associated company or joint
venture exceeds the carrying amount of the holdings in the consolidated financial
statements, the value of the holding is reduced to zero. Settlement of losses also
occurs against long-term unsecured financial assets (subordinated loans), which,
in substance, form part of Skanska’s net investment in the associated company
or joint venture and are thus recognized as shares. Continued losses are only
recognized if the Group has provided guarantees to cover losses arising in the
associated company or joint venture, and then as a provision.
Elimination of intra-Group profitsWhen profits arise from transactions between the Group and an associated
company or a joint venture, the portion equivalent to the Group’s share of owner-
ship is eliminated. If the carrying amount of the Group’s holding in the associated
company is less than the elimination of internal profit, the excess portion of
the elimination is recognized as prepaid income. The elimination of the internal
profit is adjusted in later financial statements based on how the asset is used or
when it is divested. If a loss arises from a transaction between the Group and an
associated company or a joint venture, the loss is eliminated only if it does not
correspond to an impairment loss on the asset.
If a profit or loss has arisen in the associated company or joint venture, the
elimination affects the income recognized under “Income from joint ventures and
associated companies.”
The equity method is applied until the date when the significant influence in an
associated company or the joint controlling interest in a joint venture ceases. The
sale of an interest in an associated company or in a joint venture is recognized on
the date that the Group no longer has control over the holding.
Note 20 B provides information about associated companies and joint ventures.
Skanska Annual Report 2017102 Notes including accounting and valuation principles
IFRS 11 Joint Arrangements A joint arrangement exists when the co-owners are bound by a contractual
arrangement, and the contractual arrangement gives those parties joint control of
the arrangement. The joint arrangement may be either a joint operation or a joint
venture. A joint operation exists where the co-owners have rights to the assets
of the arrangement and obligations for the liabilities of the arrangement. A joint
arrangement that is not structured through the formation of a separate company
is a joint operation. Contracting projects executed in cooperation with outside
contracting companies, with joint and several liability, are reported by Skanska
as joint operations. If the joint arrangement is a separate company but the vast
majority of the company’s production is acquired by the co-owners and there is no
obstacle to its sale to an external party, the joint arrangement is often consid-
ered to be a joint operation. In other cases the arrangement is a joint venture. If
the co-owners of the joint arrangement only have rights to the net assets of the
arrangement, it is a joint venture. Classification of a joint arrangement requires
a determination of its legal form, the terms of the contractual arrangement
between the co-owners and other circumstances.
The proportional method is applied for joint operations, which means that the
revenue, costs, assets and liabilities of the joint operation are included line by line
in the consolidated financial statements according to Skanska’s interest in the joint
operation. Joint operations are described in Note 20 C.
The equity method is used for joint ventures when preparing the consolidated
financial statements. This method is described under the heading IAS 28.
In connection with infrastructure projects, the Group’s investment may include
either holdings in or subordinated loans to a joint venture. Both are treated in the
accounts as holdings.
Note 20 B provides information about joint ventures and a specification of
significant holdings in joint operations is given in Note 20 C.
IAS 11 Construction ContractsProject revenues are reported in accordance with IAS 11. This means that the in-
come from a construction project is reported successively as the project progresses
towards completion. The stage of completion is mainly determined on the basis
of accumulated project expenses in relation to estimated accumulated project
expenses upon completion. If the outcome cannot be estimated in a satisfactory
way, revenue is reported equivalent to accumulated expenses on the closing day
(zero recognition). Anticipated losses are immediately expensed.
The original contract amount as well as additional work, claims for special
compensation and incentive payments are recognized as project revenue, but
normally only to the extent that the latter have been approved by the customer.
All services that are directly related to the construction project are covered by IAS
11. Other services are covered by IAS 18. For projects related to construction of
real estate, IFRIC 15 provides guidance about in which cases IAS 11 or IAS 18 are
to be applied.
If substantial non-interest-bearing advance payments have been received, the
advance payment is discounted and recognized as an interest-bearing liability.
The difference between a nominal amount and a discounted amount constitutes
project revenue and is recognized as revenue according to the percentage-of-
completion method. The upward adjustment in the present value of the advance
payment in subsequent financial statements is reported as an interest expense.
The difference between accrued project revenue and an amount not yet
invoiced is recognized as an asset (receivables due from clients for contract work)
according to the percentage-of-completion method. Correspondingly, the dif-
ference between an invoiced amount and yet-to-be-accrued project revenue is
reported as a liability (liabilities to clients for contract work). Major machinery pur-
chases that are intended only for an individual project as well as significant start-
up expenses are included to the extent they can be attributed to future activities
as receivables from the client and are included in the asset or liability amount as
indicated in this paragraph, but without affecting accrued project revenue.
Tendering expenses are not capitalized, but instead are charged against
earnings on a continuous basis. Tendering expenses that arose during the same
quarter that the order was received, and that are attributable to the project, may
be treated as project expenditures. Instead of the quarter when the order was re-
ceived, the quarter when the Group receives the status of preferred bidder applies
in the case of infrastructure projects, provided that it is considered highly probable
that a final agreement will be reached. Tendering expenses that were recognized
in prior closing, interim or annual reporting periods may not be recognized as
project expenses in later periods.
Forward contracts related to hedging of operating transaction exposure are rec-
ognized at fair value on the closing day. If hedge accounting is not applicable, the
liquidity effect when extending a forward contract that meets future cash flow is
included among operating expenses. If the amount has a significant impact, it is
to be excluded when determining stage of completion.
Most construction contracts contain clauses concerning warranty obligations
on the part of the contractor, with the contractor being obliged to remedy errors
and omissions discovered within a certain period after the contracted object has
been handed over to the customer. Such obligations may also be required by law.
The main principle is that a provision for warranty obligations must be calculated
for each individual project. Provisions must be made continuously during the
course of the project and the estimated total provision must be included in the
project’s expected final expenses. For units with similar projects, the provision
may be made in a joint account instead and be calculated for the unit as a whole
with the help of ratios that have historically constituted a satisfactory provision for
these obligations.
IAS 18 RevenueRevenue other than project revenue is recognized in accordance with IAS 18. In
the case of rental income, the revenue is divided evenly over the period of the
lease. The total cost of benefits provided upon signing of a lease is recognized as
a reduction in lease income on a straight-line basis over the lease period. Compen-
sation for services performed that does not constitute project revenue is recog-
nized as revenue based on the degree of completion on the closing day, which is
normally determined as services performed as of the closing day in proportion to
the total to be performed. The difference that may then arise between services in-
voiced and services performed is recognized in the statement of financial position
among “Other operating receivables” (or “Other operating liabilities”). Deliveries
of merchandise are reported as revenue when the essential risks and rewards as-
sociated with ownership of the merchandise have been transferred to the buyer.
A dividend is recognized as revenue when the right to receive payment has
been established.
Income from the sale of financial investments is recognized when the signifi-
cant risks and rewards associated with ownership of the instruments have been
transferred to the buyer and the Group no longer controls the instruments.
Interest is recognized using an interest rate that provides a uniform return on
the asset in question, which is achieved by applying the effective interest method.
Effective interest is the interest rate at which the present value of all future pay-
ments is equal to the carrying amount of the receivable.
Revenue is carried at the fair value of what is received or will be received. This
means that receivables arising at the time of divestments are regarded as having
been acquired at fair value (discounted present value of future incoming pay-
ments) if the interest rate on the date of the purchase is below the market interest
rate and the difference in absolute terms is significant.
Revenue is recognized only if it is probable that the economic benefits will flow
to the Group. If uncertainty later arises with regard to the possibility of receiving
payment for an amount that has already been recognized as revenue, the amount
for which payment is no longer probable is recognized as an expense instead of as
an adjustment of the revenue amount that was originally recognized.
IFRIC 12 Service Concession ArrangementsIFRIC 12, which affects Skanska Infrastructure Development, deals with the ques-
tion of how the operator of a service concession should account for the infrastruc-
ture, as well as the rights it receives and the obligations it undertakes under the
agreement. The operator constructs or upgrades infrastructure (construction or
upgrade services) used to provide a public service and maintains the infrastructure
(operation services) for a specified period of time. The consideration (payment)
that the operator receives is allocated between construction or upgrade services
and operation services according to the relative fair values of the respective
services. Construction or upgrade services are reported in compliance with IAS
11 and operation services in compliance with IAS 18. For construction or upgrade
services, the consideration may be rights to a financial asset or an intangible asset.
If the operator has an unconditional right in specified or determinable amounts, it
is a financial asset. If the operator instead has the right to charge the users of the
public service, it is an intangible asset.
Skanska Annual Report 2017 103Notes including accounting and valuation principles
IFRIC 15 Agreements for the Construction of Real EstateIFRIC 15 is applied to accounting for revenue and expenses when a company
undertakes the construction of real estate. The interpretation addresses the issue
of whether accounting for construction of real estate should be in accordance
with IAS 11 or IAS 18, and when the revenue from the construction of real estate
should be recognized. It assumes that the company retains neither an involvement
nor effective control over the real estate to an extent that would preclude
recognition of the consideration as revenue. IAS 11 is to be applied when the
buyer can specify the structural elements of the design of the real estate before
construction begins, or specify major changes once construction is in progress.
Otherwise IAS 18 is to be applied. If IAS 11 is applied, the percentage-of-completion
method is used. If IAS 18 is applied, it must first be determined whether the
agreement involves the rendering of services or the sale of goods. If the company
is not required to acquire or supply construction materials, it is an agreement for
rendering of services and revenue is recognized according to the percentage-
of-completion method. If the company is required to provide services as well as
construction materials, it is an agreement for the sale of goods. Revenue is then
recognized when, among other things, the company has transferred to the buyer
the significant risks and rewards associated with ownership, which normally
occurs upon the transfer of legal ownership, which often coincides with the date
the purchaser takes possession of the property.
For Residential Development and Commercial Property Development, the
implications of IFRIC 15 are that revenue recognition of a property divestment
occurs only when the purchaser assumes legal ownership of the property, which
normally coincides with taking possession of the property. For residential projects
in Finland and Sweden that are initiated by Skanska, housing corporations and
cooperative housing associations are often used to reach individual home buyers.
In these cases revenue recognition occurs when the home buyer takes possession
of the home.
IFRS 15 Revenue from Contracts with Customers – Effective from January 1, 2018The new standard IFRS 15 went into effect on 1 January 2018 and replaces IAS 11,
IAS 18 and IFRIC 15. References in other standards to IAS 11 and IAS 18 will be
replaced by references to IFRS 15.
Under IFRS 15 revenue is recognized based on a five-step model. Step one
involves identifying the contract with a customer. If two or more contracts are
entered into with a customer at the same time and the price of one contract is
dependent on the other contract, the contracts are combined. A contract modifi-
cation involves a change to the scope or price (or both) of a contract that has been
approved by the contracting parties. A contract modification exists when the
parties approve a change that either creates new or changes existing rights and
responsibilities for the contracting parties. A contract modification is treated as a
separate contract when the scope of the contract increases due to the addition of
promised goods or services which are distinct and where the price of the contract
is raised by an amount reflecting the company’s stand-alone selling price for the
additional goods or services promised. If the parties have not approved a contract
modification the entity is to continue applying the standard for the existing contract
until such time as the contract modification is approved.
Step two involves identifying the separate performance obligations in the
contract. A performance obligation is a promise to the customer to transfer goods
or services that are distinct, or a series of distinct goods or services that are essen-
tially the same and follow the same model for transfer to the customer. Goods or
services are distinct if the customer can benefit from the goods or services either
on their own or in combination with other resources that are readily available
to the customer and if the entity’s promise to transfer the goods or services to
the customer is separately identifiable from the other promises in the contract.
Skanska’s client contracts are usually of the type that do not require categorization
according to the standard into two or more performance obligations.
In step three the transaction price is determined. This determination involves
establishing a fixed agreed price, variable revenue, any contingent considerations,
bonuses and penalties. If there is variable revenue an estimate is made of the
highest amount of revenue that will likely not require a reversal of accumulated
revenue in the future. If the contract includes a significant financing component,
the transaction price is to be adjusted for the effect of the time value of the
money. Changes to and supplementary orders in contracts that have not yet been
approved by the client do not require an increase in the transaction price in the
project’s estimated income upon completion.
The revenue/transaction price is allocated in step four over the separate perfor-
mance obligations in the contract if more than one obligation exists. The allocated
transaction price for each individual obligation is to reflect the consideration that
the company is expecting to have the right to in exchange for the transfer of the
promised goods or services to the customer, based on a relative, stand-alone
selling price.
Revenue is recognized in step five when the performance obligation is satisfied,
either over time or at a point in time and when the customer obtains control of
the asset. Revenue is recognized over time when the customer simultaneously
receives and consumes the benefits provided through the entity’s performance,
when the entity’s performance creates or enhances an asset that the customer
controls, or when the entity’s performance does not create an asset with an
alternative use for the entity and the entity also has the right to payment for its
performance completed to date. If a performance obligation is not satisfied over
time as stated above, the entity fulfills the obligation at a certain point in time.
This takes place at the point when the customer gains control of the promised as-
set. Indicators for determining control can be that the entity has the right to
receive payment for the asset, the customer has the legal right of ownership of
the asset, the entity has transferred the physical possession of the asset, the cus-
tomer has the material risks and rewards associated with ownership of the asset
or the customer has accepted the asset.
Revenue for Skanska’s construction contracts is recognized over time according
to the percentage-of-completion method. Revenue from the sale of properties is
recognized on the handover date.
For each performance obligation that is satisfied over time, revenue is to be
recognized over time by measuring the time passed in relation to full satisfaction
of the obligation. Skanska applies the input method which is used consistently
for similar performance obligations and under similar circumstances. In the input
method revenue is recognized on the basis of the entity’s input in fulfilling the
performance obligation (e.g. resources consumed, hours spent on work, costs
incurred) in relation to the total expected input to fulfill the performance obligation.
An exception from this cost-based input method might be costs attributable to
significant ineffectiveness in the entity’s performance or where costs incurred are
not in proportion to the passage of time to fulfill the obligation.
Expenses relating to obtaining a contract, i.e. expenses the entity would have
had if it had not won the contract, are recognized as an asset only if the entity
is expecting to have those expenses covered. Expenses to complete a contract
that does not fall under a standard other than IFRS 15 are recognized as an asset
if the expenses have a direct link to a contract or to an expected contract, if the
expenses create or enhance resources that will be used to fulfill the performance
obligation in the future and that are also expected to be recovered.
Loss contracts are expensed immediately and provisions for losses are made for
the remaining work to be done and recognized according to IAS 37.
IAS 17 LeasesThe accounting standard distinguishes between finance and operating leases. A
finance lease is characterized by the fact that the economic risks and rewards inci-
dental to ownership of the asset have substantially been transferred to the lessee.
If this is not the case, the agreement is regarded as an operating lease.
Finance leasesAssets that are leased under a finance lease, as a lessee, are recognized as assets.
The obligation to make future lease payments is recognized as a non-current or
current liability. The leased assets are depreciated during their respective useful
lives. When making payments on a finance lease, the minimum lease payment
is divided between interest expense and reduction of the outstanding liability.
Interest expense is allocated over the lease period in such a way that each reporting
period is charged an amount equivalent to a fixed interest rate for the liability
recognized during each respective period. Variable payments are recognized
among expenses in the periods when they arise.
Assets leased under finance leases, as a lessor, are not recognized as property,
plant and equipment, since the risks incidental to ownership have been trans-
ferred to the lessee. Instead a financial receivable is recognized for the future
minimum lease payments.
Skanska Annual Report 2017104 Notes including accounting and valuation principles
Operating leasesAs for operating leases, the lease payment is recognized as an expense over the
lease term on the basis of utilization, and taking into account the benefits that
have been provided or received when signing the lease.
The Commercial Property Development business stream carries out operating
lease transactions. Information on future minimum lease payments (rents) is
provided in Note 40, which also contains other information about leases.
IAS 16 Property, Plant and EquipmentProperty, plant and equipment are recognized as assets if it is probable that the
Group will derive future economic benefits from them and the cost of the assets
can be reliably calculated. Property, plant and equipment are recognized at cost
minus accumulated depreciation and any impairment losses. Cost includes the
purchase price plus expenses directly attributable to the asset in order to bring
it to the location and condition to be used in the intended manner. Examples of
directly attributable expenses are delivery and handling costs, installation, owner-
ship documents, consultant fees and legal services. Borrowing costs are included
in the cost of property, plant and equipment produced by the Group. Impairment
losses are applied in compliance with IAS 36.
The cost of property, plant and equipment produced by the Group includes
expenditures for materials and remuneration to employees, plus other applicable
manufacturing costs that are considered attributable to the asset.
Further expenditures are added to cost only if it is probable that the Group will
derive future economic benefits from the asset and the cost can be reliably
calculated. All other further expenditures are recognized as expenses in the
period when they arise.
The decisive factor in determining when a further expenditure is added to cost
is whether the expenditure is related to replacement of identified components, or
parts thereof, at which time such expenditures are capitalized. In cases where a
new component is created, this expenditure is also added to cost. Any undepreci-
ated carrying amounts for replaced components, or parts thereof, are disposed
of and recognized as an expense at the time of replacement. If the cost of the
removed component cannot be determined directly, its cost may be estimated as
the cost of the new component adjusted by a suitable price index to take into
account inflation. Repairs are recognized as expenses on a continuous basis.
Property, plant and equipment that consist of parts with different periods of
service are treated as separate components of property, plant and equipment.
Depreciation occurs on a straight-line basis during the estimated useful life, or
based on degree of use, taking into account any residual value at the end of the
period. Office buildings are divided into foundation and frame, with a depreciation
period of 50 years, installations of 35 years, and non-weight-bearing parts of
15 years. In general, industrial buildings are depreciated over a 20-year period
without allocation into different parts. Stone crushing and asphalt plants as well
as concrete mixing plants are depreciated over 10 to 25 years depending on their
condition when acquired and without being divided into different parts. For other
buildings and equipment, division into different components occurs only if major
components with different useful lives can be identified. For other machinery and
equipment, the depreciation period is normally between five and 10 years. Minor
equipment is depreciated immediately. Gravel pits and stone quarries are depreci-
ated as materials are removed. Land is not depreciated. Assessments of an asset’s
residual value and period of service are performed annually.
The carrying amount of a property, plant and equipment item is removed from
the statement of financial position when it is disposed of or divested, or when no
further economic benefits are expected from the use or disposal/divestment of
the asset.
IAS 38 Intangible AssetsThis accounting standard deals with intangible assets. Goodwill that arises upon
acquisition of companies is recognized in accordance with the rules in IFRS 3.
An intangible asset is an identifiable non-monetary asset without physical
substance that is used for producing or supplying goods or services or for leasing
and administration. To be recognized as an asset, it is necessary both that it be
probable that future economic benefits attributable to the asset will flow to the
entity and that the cost can be reliably calculated. It is especially worth noting
that expenditures recognized in prior annual or interim reporting periods may not
subsequently be recognized as an asset.
Research expenses are recognized in the income statement as they arise. Develop-
ment expenses, which are expenses for designing new or improved materials,
structures, products, processes, systems and services by applying research findings
or other knowledge, are recognized as assets if it is probable that the asset will
generate future revenue. Other development expenses are expensed directly.
Expenses for regular maintenance and modifications of existing products,
processes and systems are not recognized as development expenses. Nor is work
performed on behalf of a customer recognized as development expenses.
Intangible assets other than goodwill are recognized at cost minus accumulated
amortization and impairment losses. Impairment losses are applied in compliance
with IAS 36.
Amortization is recognized in the income statement on a straight-line basis, or
based on the degree of use, over the useful life of intangible assets, to the extent
such a period can be determined. Consideration is given to any residual value at
the end of the period. Acquired service contracts are amortized over the remaining
contract term (three to six years, as applicable), acquired customer contracts are
amortized at the pace of completion and patents are amortized over 10 years.
Investments in major computer systems are amortized over a maximum of seven
years.
Further expenditures for capitalized intangible assets are recognized as an
asset only when they increase the future economic benefits of the specific asset to
which they are attributable.
IAS 36 Impairment of AssetsAssets covered by IAS 36 are tested on every closing day for indications of impair-
ment. Exempted assets, for example inventories (including current-asset proper-
ties), assets arising when construction contracts are carried out and financial
assets included within the scope of IAS 39, are measured according to the respective
accounting standard.
Impairment losses are determined on the basis of the recoverable amount of
assets, which is the higher of fair value less cost to sell and value in use. In calcu-
lating value in use, future cash flows are discounted using a discounting factor
that takes into account risk-free interest and the risk associated with the asset.
Estimated residual value at the end of the asset’s useful life is included as part of
value in use. For assets that do not generate cash flows that are essentially inde-
pendent of other assets, the recovery value is calculated for the cash-generating
unit to which the asset belongs. A cash-generating unit is the smallest group of
assets that generates cash inflows that are independent of other assets or groups
of assets. For goodwill, the cash-generating unit is mainly the same as the Group’s
Business Unit or other unit reporting to the Parent Company. Operations that are
not integrated into the Business Unit’s other operations are exempted from the
main rule. The same Business Unit may also contain a number of cash-generating
units if it operates in more than one business stream.
In Construction and Residential Development, the recoverable amount of
goodwill is based on value in use, which is calculated by discounting expected
future cash flows. The discounting factor is the weighted average cost of capital
(WACC) applicable to the operation. See Note 18.
Impairment of assets attributable to a cash-generating unit is allocated mainly
to goodwill. After that, a proportionate impairment loss is applied to other assets
included in the unit.
Goodwill impairment is not reversed. A goodwill-related impairment loss
recognized in a previous interim report is not reversed in a later full-year report or
interim report.
Impairment losses on other assets are reversed if there has been a change in
the assumptions on which the estimate of the recoverable amount was based.
An impairment loss is reversed only to the extent that the carrying amount of
the asset after the reversal does not exceed the carrying amount that the asset
would have had if no impairment loss had occurred, taking into account the amor-
tization that would then have occurred.
IAS 23 Borrowing CostsBorrowing costs are capitalized provided that it is probable that they will result in
future economic benefits and the costs can be measured reliably. Generally speak-
ing, capitalization of borrowing costs is limited to assets that take a substantial
period of time for completion, which in the Group’s case mainly means the
construction of current-asset properties and properties for the Group’s own use
Skanska Annual Report 2017 105Notes including accounting and valuation principles
(non-current-asset properties). Capitalization occurs when expenditures included
in acquisition cost have arisen and activities to complete the building have begun.
Capitalization ceases when the building is completed. Borrowing costs during
an extended period when work to complete the building is interrupted are not
capitalized. If separate borrowing has occurred for the project, the actual borrowing
cost is used. In other cases, the cost of the loan is calculated on the basis of the
Group’s borrowing cost.
IAS 12 Income TaxesIncome taxes consist of current tax and deferred tax. Income taxes are recognized
in the income statement except when the underlying transaction is recognized
directly under “Other comprehensive income,” in which case the accompanying
tax effect is also recognized there. Current tax is tax to be paid or received that is
related to the year in question, applying the tax rates that have been decided or
have effectively been decided as of the closing day; this also includes adjustment
of current tax attributable to earlier periods.
Deferred tax is calculated according to the balance sheet method based on
temporary differences arising between reported and fiscal values of assets and
liabilities. The amounts are calculated based on how the temporary differences
are expected to be settled and by applying the tax rates and tax rules that have
been decided or announced as of the closing day. The following temporary differ-
ences are not taken into account: for a temporary difference that has arisen upon
initial recognition of goodwill, the initial recognition of assets and liabilities that
are not business combinations and which, on the transaction date, affect neither
recognized profit nor taxable profit. Also not taken into account are temporary
differences attributable to shares in subsidiaries and associated companies that
are not expected to be reversed in the foreseeable future. Offsetting of deferred
tax assets against deferred tax liabilities occurs when there is a right to settle cur-
rent taxes between companies.
Deferred tax assets related to deductible temporary differences and loss carry-
forwards are recognized only to the extent it is likely that they can be utilized. The
value of deferred tax assets is reduced when it is no longer considered probable
that they can be utilized.
IAS 2 Inventories Aside from customary inventories of goods, the Group’s current-asset properties
are also encompassed by this accounting standard. Both current-asset properties
and inventories of goods are measured item by item in accordance with the lowest
cost principle, which means that a property or item is measured either by its acqui-
sition cost or net realizable value, whichever is lower. Net realizable value is the
estimated selling price in the ordinary course of business less the estimated cost of
completion and the estimated costs necessary to make the sale.
When item-by-item measurement cannot be applied, the cost of inventories is
assigned by using the first-in, first-out (FIFO) formula and includes expenditures
that have arisen from acquisition of inventory assets and from bringing them to
their present location and condition. For manufactured goods, cost includes a
reasonable share of indirect costs based on normal capacity utilization. Materials
not yet installed at construction sites are not recognized as inventories, but are
included among project expenses.
Except for properties that are used in Skanska’s own business, the Group’s
property holdings are reported as current assets, since these holdings are included
in the Group’s operating cycle. The operating cycle for current-asset properties is
around three to five years.
Acquisitions of properties are recognized in their entirety only upon the transfer
of legal ownership, which normally occurs on completion of the purchase. Property
acquisitions through purchases of property-owning companies are recognized
when the shares have been taken over by Skanska.
Current-asset properties are divided up between Commercial Property Devel-
opment and Residential Development. They are also categorized as “Development
properties,” “Properties under construction” or “Completed properties.” Note 22
provides information about these properties.
Before impairment losses, properties both completed and under construction
are valued based on costs paid directly, a reasonable proportion of indirect costs
and interest expenses during the construction period. Information on market
appraisal of properties is provided at the end of this note.
Information on customary inventories of goods is found in Note 23.
IAS 37 Provisions, Contingent Liabilities and Contingent AssetsProvisionsA provision is recognized when the Group has a legal or informal obligation as a
result of a past event, and it is probable that an outflow of economic resources
will be required to settle the obligation and a reliable estimate of the amount can
be made.
Skanska makes provisions for future expenses relating to warranty obligations
according to construction contracts that involve a liability for the contractor to
remedy errors and omissions that are discovered within a certain period after the
contractor has handed over the property to the client. Such obligations may also
be required by law. More about the accounting principle applied can be found in
the section on IAS 11 in this note.
A provision is made for disputes related to completed projects if it is probable
that a dispute will result in an outflow of resources from the Group. Disputes
related to ongoing projects are taken into consideration in the valuation of the
project and are thus not included in the item “Reserve for legal disputes,” as
described in Note 29.
Provisions for restructuring expenses are recognized when a detailed restruc-
turing plan has been adopted and the restructuring has either begun or been
publicly announced.
When accounting for interests in joint ventures and associated companies, a
provision is made when a loss exceeds the carrying amount of the holding and the
Group has a payment obligation.
Contingent liabilitiesContingent liabilities are possible obligations arising from past events and whose
existence will be confirmed only by the occurrence or non-occurrence of one or
more future events not wholly within the control of the company. Also reported
as contingent liabilities are obligations arising from past events that have not
been recognized as a liability because it is not likely that an outflow of resources
will be required to settle the obligation, or the size of the obligation cannot be
estimated with sufficient reliability.
The amounts of contract fulfillment guarantees are included until the
contracted work has been transferred to the customer, which normally occurs
upon its approval in a final inspection. If the guarantee covers all or most of the
contract sum, the amount of the contingent liability is calculated as the contract
sum minus the value of the portion performed. In cases where the guarantee
only covers a small portion of the contract sum, the guarantee amount remains
unchanged until the contracted work is handed over to the customer. The guar-
antee amount is not reduced by being offset against payments not yet received
from the customer. Guarantees that have been received from subcontractors and
suppliers of materials are not taken into account, either. If the Group receives
reciprocal guarantees related to external consortium members’ share of joint and
several liability, these are not taken into account. Tax cases, court proceedings and
arbitration are not included in contingent liability amounts. Instead, a separate
description is provided.
In connection with contracting assignments, security is often provided in the
form of a completion guarantee from a bank or insurance institution. The issuer
of the guarantee, in turn, normally receives an indemnity from the contracting
company or other Group company. Such indemnities related to the Group’s own
contracting assignments are not reported as contingent liabilities, since they do
not involve any increased liability compared to the contracting assignment.
Note 33 presents information about contingent liabilities.
Contingent assetsContingent assets are possible assets arising from past events and whose exis-
tence will be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the company.
In the Group’s construction operations, claims for additional compensation
from the customer are not uncommon. If the right to additional compensation
is confirmed, this affects the valuation of the project when reporting according
to IAS 11. As for claims that have not yet been confirmed, it is not practicable to
provide information about these, unless there is an individual claim of substantial
importance to the Group.
Skanska Annual Report 2017106 Notes including accounting and valuation principles
Assets pledgedShares in joint ventures within the Infrastructure Development business stream
are reported as assets pledged when the shares in the project company, which
may be directly owned by Skanska or owned via an intermediate holding com-
pany, are pledged as collateral for loans from banks or lenders other than the
co-owners.
Note 33 provides information about assets pledged.
IAS 19 Employee BenefitsThis accounting standard makes a distinction between defined-contribution and
defined-benefit pension plans. Defined-contribution pension plans are defined as
plans in which the company pays fixed contributions into a separate legal entity
and has no obligation to pay further contributions, even if the legal entity does
not have sufficient assets to pay all employee benefits relating to their service
until the closing day. Other pension plans are defined-benefit plans. Calculation
of defined-benefit pension plans according to IAS 19 is carried out in a way that
often deviates from local rules in each country. Obligations and costs are to be cal-
culated according to the projected unit credit method. The purpose is to recognize
expected future pension disbursements as expenses in a way that yields more uni-
form expenses over the employee’s period of employment. Actuarial assumptions
about the discount rate, wage or salary increases, inflation and life expectancy are
taken into account in the calculation. Pension obligations for post-employment
benefits are discounted to present value. Discounts are calculated for all three
countries where Skanska has defined-benefit pension plans using an interest rate
based on the market return on high quality corporate bonds including mortgage
bonds, with maturities matching the pension obligations. Pension plan assets are
recognized at fair value on the closing day. In the statement of financial position,
the present value of pension obligations is recognized after subtracting the fair
value of plan assets. The pension expense and the return on plan assets recognized
in the income statement refer to the pension expense and return estimated on
January 1. The return on plan assets is calculated using the same interest rate as
is used to discount the pension obligations. Any differences compared to actual
pension expense and actual return, as well as effects of changed assumptions,
together constitute remeasurement and are reported in “Other comprehensive
income.”
If the terms of a defined-benefit plan are significantly amended, or the number
of employees covered by a plan is significantly reduced, a curtailment occurs.
Obligations are recalculated according to the new conditions. The effect of the
curtailment is recognized in profit or loss.
When there is a difference between how pension expense is determined in a
legal entity and the Group, a provision or receivable is recognized for the differ-
ence for taxes and social insurance contributions based on the company’s pension
expenses. The provision or receivable is not calculated at present value, since it is
based on present-value figures.
Deferred taxes and social insurance contributions on remeasurements are
recognized under “Other comprehensive income.”
Obligations related to contributions to defined-contribution plans are recog-
nized as expenses in the income statement as they arise.
The Group’s net obligation related to other long-term employee benefits,
aside from pensions, amounts to the value of future benefits that employees have
earned as compensation for the services they have performed during the current
and prior periods. The obligation is calculated using the projected unit credit
method and is discounted to present value, and the fair value of any plan assets is
subtracted. The discount rate is again based on the yield on high quality corporate
bonds including mortgage bonds, or government bonds, with a maturity match-
ing the maturity of the obligations.
A provision is recognized in connection with termination of employees’
employment only if the company is obligated through its own detailed formal
termination plan – and there is no realistic possibility of annulling the plan – to
end employment before the normal date, or when benefits are offered in order to
encourage voluntary resignation. In cases where the company terminates employ-
ees’ employment, the provision is calculated on the basis of a detailed plan that
includes at least the location, function and approximate number of employees
affected, as well as the benefits for each job category or position and the time at
which the plan will be implemented.
Only an insignificant percentage of the Group’s defined-benefit pension obliga-
tions were financed by premiums to the retirement insurance company Alecta.
Since the required figures cannot be obtained from Alecta, these pension obliga-
tions are reported as a defined-contribution plan. Since the same conditions apply
to the new AFP plan in Norway, this is also reported as a defined-contribution
plan.
IFRS 2 Share-based Payment The Seop 3 and Seop 4 employee ownership programs are recognized as share-
based payment settled with equity instruments, in compliance with IFRS 2. This
means that the fair value is calculated on the basis of expected fulfillment of
targets. This value is allocated over the respective vesting period. After the fair
value is established, there is no reappraisal during the remainder of the vesting
period, except in the case of changes in the number of shares because the condi-
tion of continued employment during the vesting period is no longer met.
Social insurance contributionsSocial insurance contributions that are payable in connection with share-based
payments are reported in compliance with statement UFR 7 from the Swedish
Financial Reporting Board. The cost of social insurance contributions is allocated
over the period when the services are performed. The provision that arises is reap-
praised on each financial reporting date to correspond to the estimated contribu-
tions that are due at the end of the vesting period.
IAS 7 Statement of Cash FlowsIn preparing its cash flow statement, Skanska applies the indirect method in
compliance with the accounting standard. Aside from cash and bank balance
flows, cash and cash equivalents are to include short-term investments whose
conversion into bank balances may occur in an amount most of which is known
in advance. Short-term investments with maturities of less than three months
are regarded as cash and cash equivalents. Cash and cash equivalents that are
subject to restrictions are reported either as current receivables or as non-current
receivables.
In addition to the cash flow statement prepared in compliance with the standard,
the Report of the Directors presents an operating cash flow statement that does
not conform to the structure specified in the standard. The operating cash flow
statement was prepared on the basis of the operations that the different business
streams carry out.
IAS 33 Earnings per ShareEarnings per share are reported directly below the consolidated income statement
and are calculated by dividing the portion of profit for the year that is attributable
to the Parent Company’s equity holders (shareholders) by the average number of
shares outstanding during the period.
For Sop 3 and Seop 4 employee ownership programs, the dilution effect is
calculated by adding potential ordinary shares to the number of ordinary shares
before dilution. The calculation of potential ordinary shares occurs in two stages.
First there is an assessment of the number of shares that may be issued when
established targets are reached. The number of shares for the respective program
year is then determined the following year, provided that the condition of continued
employment is met. In the next step, the number of potential ordinary shares is
reduced by the value of the consideration that Skanska is expected to receive,
divided by the average market price of a share during the period.
IAS 24 Related Party DisclosuresAccording to this accounting standard, information must be provided about
transactions and agreements with related companies and physical persons. In the
consolidated financial statements, intra-Group transactions fall outside this
reporting requirement. Notes 36, 37 and 39 provide disclosures in accordance
with the accounting standard. With respect to the Parent Company, this informa-
tion is provided in Notes 62 and 63.
IAS 40 Investment PropertySkanska is not reporting any investment properties. Properties that are used in
the Group’s own operations are reported in compliance with IAS 16. The Group’s
holdings of current-asset properties are covered by IAS 2 and thus fall outside the
application of IAS 40.
IFRS 8 Operating Segments According to this standard, an operating segment is a component of the Group
carrying out business operations whose operating income is evaluated regularly
Skanska Annual Report 2017 107Notes including accounting and valuation principles
by the highest executive decision-maker and about which separate financial
information is available.
Skanska’s operating segments consist of its business streams: Construction,
Residential Development, Commercial Property Development and Infrastructure
Development.
The Group Leadership Team (called the Senior Executive Team until the end of
2017) is the Group’s highest executive decision-maker.
The principle for segment reporting of Residential Development and Commercial
Property Development in the income statement deviates from IFRS on two points.
In segment reporting, a divestment gain is recognized on the date a binding
sales contract is signed. Segment reporting accounts for all joint ventures within
Residential Development using the proportional method. Note 4 presents a rec-
onciliation between segment reporting and the income statement in compliance
with IFRS.
Note 4 provides information about operating segments. Financial reporting
to the Group Leadership Team focuses on the areas for which each respective
operating segment is operationally responsible: operating income in the income
statement and capital employed. For each respective operating segment, the note
thus reports external and internal revenue, cost of production and management,
selling and administrative expenses and capital employed. Capital employed re-
fers to total assets minus tax assets and receivables invested in Skanska’s treasury
unit (“internal bank”) less non-interest-bearing liabilities excluding tax liabilities.
In the calculation of capital employed, a capitalized interest expense is removed
from total assets for the Residential Development and Commercial Property
Development segments. Acquisition goodwill has been reported in the operating
segment to which it relates.
In transactions between operating segments, pricing occurs on market terms.
Certain parts of the Group do not belong to any operating segment. These are
reported in Note 4 under the heading “Central and eliminations.” This includes
the Latin American operations, where there are no longer any ongoing projects.
Operating segment income includes intra-Group profits and, consequently, these
are eliminated during reconciliation with the consolidated income statement and
the consolidated statement of financial position.
In addition to information about operating segments, Note 4 provides disclo-
sures on external revenue for the entire Group, broken down into Sweden, USA
and other countries, and disclosures on the allocation of certain assets between
Sweden and other countries.
IAS 10 Events After the Reporting PeriodEvents after the end of the reporting period may, in certain cases, confirm a situa-
tion that existed on the closing day. Such events are taken into account when the
financial reports are prepared. Information is provided about other events that
occur after the closing day and before the financial report is signed if the omission
of such information would affect the ability of a reader to make an accurate
assessment and a sound investment decision.
Information on this is provided in Note 41 and Note 66.
IAS 32 Financial Instruments: Presentation Offsetting of financial assets and financial liabilities occurs when an entity has
a legal right to offset items against each other and intends to either settle these
items on a net basis or simultaneously divest the asset and settle the liability.
Prepaid income and expenses are not financial instruments. Accrued income
and expenses that are related to the business are not recognized as financial
instruments. Thus, receivables due from (or payables to) customers for contract
work are not included under financial instruments. Obligations for employee
benefit plans in compliance with IAS 19, such as pension plans, are exempt from
IAS 32 and are thus not recognized as financial instruments. Assets and liabilities
that are not based on contracts, such as income taxes, are not considered financial
instruments.
Information in compliance with the accounting standard is provided mainly in
Notes 6, 21 and 27.
IAS 39 Financial Instruments: Recognition and MeasurementThe accounting standard deals with measurement and recognition of financial
instruments. Categories exempt from application according to IAS 39 include
holdings in subsidiaries, associated companies and joint ventures, leases, the
rights under employment contracts, treasury shares, and financial instruments as
described in IFRS 2.
All financial instruments covered by this standard, including all derivatives, are
reported in the statement of financial position.
A derivative is a financial instrument whose value changes in response to
changes in an underlying variable and that requires no initial investment, or
one that is small and that is settled at a future date. An embedded derivative is
a contract condition that causes the value of the contract to be affected in the
same way as if the condition were an independent derivative. This is the case,
for example, when a construction contract is expressed in a currency that is a
foreign currency for both parties. If it is customary for the foreign currency to be
used for this type of contract, the embedded derivative will not be separated. A
reassessment of whether embedded derivatives are to be separated from the host
contract is carried out only if the host contract is changed.
A financial asset or financial liability is recognized in the statement of financial
position when the Group becomes a party to the contractual provisions of the
instrument. Trade accounts receivable are recognized in the statement of financial
position when an invoice has been sent. A liability is recognized when the coun-
terparty has performed and there is a contractual obligation to pay, even if the
invoice has not yet been received. Trade accounts payable are recognized when an
invoice has been received.
A financial asset is derecognized from the statement of financial position when
the contractual rights are realized or expire, or the Group loses control of them.
The same applies to a portion of a financial asset. A financial liability is derecog-
nized from the statement of financial position when the contractual obligation
is fulfilled or otherwise extinguished. The same applies to a portion of a financial
liability.
Acquisitions and divestments of financial assets are recognized on the transac-
tion date, which is the date the company undertakes to acquire or divest the asset.
Financial instruments are initially recognized at cost, equivalent to the instru-
ment’s fair value plus transaction costs, except instruments in the category
“assets at fair value through profit or loss,” which are recognized exclusive of
transaction costs. Recognition then occurs depending on how they are classified,
as described below.
Financial assets are classified as “assets at fair value through profit or loss,”
“held-to-maturity investments,” “loans and receivables” and “available-for-sale
assets.” An asset is classified among “available-for-sale assets” if the asset is not
a derivative and the asset has not been classified in any of the other categories.
Derivatives are classified under “assets at fair value through profit or loss” un-
less they are included in hedge accounting. Equity instruments with unlimited
useful lives are classified either as “assets at fair value through profit or loss” or
“available-for-sale assets.”
“Assets at fair value through profit or loss” and “available-for-sale assets” are
measured at fair value in the statement of financial position. Changes in the value
of “assets at fair value through profit or loss” are recognized in the income state-
ment, while changes in the value of “available-for-sale assets” are recognized
under “Other comprehensive income.” When the latter assets are divested,
accumulated gains or losses are transferred to the income statement. Investments
in holdings of companies other than Group companies, joint ventures and
associated companies are included in “available-for-sale assets,” but are mea-
sured at cost, unless the fair value can be reliably established. Impairment losses
on “available-for-sale assets,” as well as interest and dividends on instruments
in this category, are recognized directly in the income statement. Changes in
exchange rates for monetary “available-for-sale assets” are also recognized
directly in the income statement, while changes in exchange rates for non-mon-
etary “available-for-sale assets” are recognized in other comprehensive income.
“Held-to-maturity investments” and “loans and receivables” are measured at
amortized cost. Impairment losses on “held-to-maturity investments,” “loans and
receivables” and “available-for-sale assets” occur when the expected discounted
cash flow from the financial asset is less than the carrying amount.
Financial liabilities are classified as “liabilities at fair value through profit or
loss” and “other financial liabilities.” Derivatives are classified under “liabilities at
fair value through profit or loss” unless included in hedge accounting. “Liabilities
at fair value through profit or loss” are measured at fair value in the statement of
financial position, with the change in value recognized in the income statement.
“Other financial liabilities” are measured initially at the amount borrowed less
any transaction costs. The liabilities are thereafter measured at amortized cost.
Any differences between the amount borrowed and the repayment amount are
recognized in profit for the year, allocated over the loan period and applying the
effective interest method. This method involves calculating the effective interest
Skanska Annual Report 2017108 Notes including accounting and valuation principles
rate, which is the interest rate that exactly discounts estimated future receipts
and payments over the term of the instrument to the recognized net value of the
financial asset or liability.
In reporting both financial assets and financial liabilities in Note 6, Skanska has
chosen to report “hedge-accounted derivatives” separately.
Skanska uses hedge accounting for cash flow hedging and hedging of net
investment in foreign operations. In hedge accounting for cash flow hedges and
hedging of net investments in foreign operations, the effectiveness of hedging
is assessed regularly, and hedge accounting is applied only where hedging is
deemed effective. Information on hedging and hedge accounting is provided in
Note 6.
Skanska uses currency derivatives and foreign currency loans to hedge against
fluctuations in exchange rates. Recognition of derivatives varies depending on
whether hedge accounting in compliance with IAS 39 is applied or not.
Unrealized gains and losses on currency derivatives related to hedging of
operational transaction exposure (cash flow hedging) are measured on market
terms and recognized at fair value in the statement of financial position. The
entire change in value is recognized directly in operating income, except in cases
where hedge accounting is applied. In hedge accounting, unrealized gains or
losses are recognized under “Other comprehensive income.” When the hedged
transaction occurs and is recognized in the income statement, accumulated
changes in value are transferred from other comprehensive income to operating
income.
Embedded currency derivatives in commercial contracts expressed in a currency
which is a foreign currency for both parties are measured at fair value, provided
that the currency is not customary for this type of contract.
Unrealized gains and losses when assessing the fair value of these embedded
currency derivatives are recognized at fair value in the statement of financial posi-
tion. Changes in value are recognized in operating income.
Currency derivatives for hedging translation exposure are measured at fair
value in the statement of financial position. Foreign currency loans for hedging
translation exposure are measured at the closing day exchange rate. Due to the
application of hedge accounting, exchange rate differences after taking into
account the tax effect are recognized under “Other comprehensive income.”
If foreign operations are divested, accumulated exchange rate differences
attributable to the operations are transferred from other comprehensive income
to the income statement. The interest component and changes in the value of the
interest component of currency derivatives are recognized as financial income or
expenses.
In Infrastructure Development projects interest rate derivatives are used in order
to achieve fixed interest on long-term financing. Hedge accounting is applied to
these interest rate derivatives.
Skanska also uses interest rate derivatives to hedge against fluctuations in
interest rates.
Hedge accounting in compliance with IAS 39 is applied to some of these deriva-
tives.
Unrealized gains and losses on interest rate derivatives are recognized at fair
value in the statement of financial position. Where hedge accounting is applied,
changes in value are recognized in other comprehensive income. In cases where
hedge accounting is not applied, changes in value are directly recognized as finan-
cial income or expenses in the income statement. The ongoing current interest
coupon portion is recognized as interest income or an interest expense.
IFRS 9 Financial Instruments – Effective from January 1, 2018The new standard IFRS 9 went into effect on January 1, 2018 and replaces the
old standard IAS 39. References in other standards to IAS 39 will be replaced by
references to IFRS 9.
IFRS 9 Financial Instruments addresses the recognition of financial assets
and liabilities. Categories exempt from application according to IFRS 9 include
holdings in subsidiaries, associated companies and joint ventures, leases, rights
under employment contracts, treasury shares, financial instruments as described
in IFRS 2, and rights and responsibilities within IFRS 15 except for the rights in IFRS
15 where an impairment requirement according to IFRS 9 applies. All financial
instruments, including derivatives, are recognized as a financial asset or financial
liability in the statement of financial position when the entity becomes a party to
the contractual provisions of the instrument. A regular way purchase or sale of a
financial asset is recognized in and derecognized from the statement of financial
position using trade date accounting. A financial asset is derecognized from the
statement of financial position when the contractual rights to cash flows from the
financial asset expire or when the entity transfers the contractual rights to receive
cash flows from the financial asset or retains the contractual rights to receive cash
flows, but assumes a contractual obligation to pay cash flows to one or more
recipients. A financial liability is derecognized from the statement of financial
position only when the contractual obligation is fulfilled, cancelled or expires.
Presentation of financial assets is based on the entity’s business model and the
contractual cash flows of the asset. A financial asset is measured at amortized
cost if the asset is held within the framework of a business model the objective of
which is to hold financial assets in order to collect contractual cash flows, and the
cash flows on specified dates are solely payments of principal and interest on the
principal amount outstanding.
A financial asset is measured at fair value through other comprehensive income
if the asset is held according to a business model the objective of which can be
achieved both by collecting contractual cash flows and selling financial assets,
and the cash flows are solely payments of principal and interest on the principal
amount outstanding. A financial asset is measured at fair value though profit or
loss if it is not measured at amortized cost or at fair value through other compre-
hensive income.
All financial assets are measured at amortized cost with the exception of:
a) financial liabilities measured at fair value through profit or loss (such liabilities,
including derivatives that are liabilities, are thereafter to be measured at fair
value); b) financial liabilities arising when a transfer of a financial asset does not
meet the criteria for derecognition from the statement of financial position or
where a continued commitment is appropriate; c) financial guarantee contracts;
d) a loan commitment with interest that is below the market interest rate; and e)
a contingent consideration acknowledged by an acquiring party in connection
with a business combination covered by IFRS 3 (such contingent consideration is
thereafter measured at fair value with changes recognized through profit or loss).
An entity is only entitled to reclassify all relevant financial assets when the
entity changes its business model for managing financial assets. Reclassification
of financial liabilities is not permitted.
Financial assets and liabilities are initially measured at fair value plus or minus
transaction costs upon acquisition of a financial asset or financial liability for a
financial asset or financial liability that is not measured at fair value through profit
or loss. Trade receivables that do not contain a significant financing component
are measured upon initial recognition at their transaction price (as defined in
IFRS 15). After initial recognition, financial assets are measured at amortized cost,
fair value through other comprehensive income or fair value through profit or
loss. Subsequent measurement of financial liabilities is at amortized cost or fair
value through profit or loss.
An entity is to apply the impairment requirement to expected credit losses on
financial assets and a loss provision for these is to be recognized as a deduction
from the asset. On every closing day the loss provision is to be equivalent to an
amount reflecting the expected credit losses for the remaining time until maturity
if the credit risk has increased significantly since it was initially recognized. If the
credit risk has not increased significantly since it was first recognized, the loss pro-
vision is to be equivalent to 12 months of expected credit losses. For trade receiv-
ables, contractual assets and lease receivables, the loss provision is always to be at
an amount equivalent to the remaining time to maturity. An entity is to measure
expected credit losses taking into account an objective and probability-weighted
amount, the time value of money, reasonable and supportable information about
past events, current conditions and forecasts of future economic conditions.
The purpose of hedge accounting is so that, in its financial statements, an
entity can report the effect of its risk management where financial instruments
are used to manage exposure from specific risks that would impact results. A de-
rivative that is measured at fair value through profit or loss can be identified as a
hedging instrument. A financial asset or liability that is not a derivative measured
at fair value through profit or loss can be identified as a hedging instrument un-
less it is a financial liability identified as measured through profit or loss, for which
the amount of the change in fair value arising from changes in credit risk for the
liability are recognized in other comprehensive income. In hedge accounting, only
contracts with an external party outside the Group can be identified as hedging
instruments. A hedged item may be a recognized asset or liability, an unrecog-
nized binding commitment, a highly likely forecast transaction or a net investment
in foreign operations. A hedging relationship only qualifies for hedge accounting
when the following criteria have been met: the hedging relationship consists only
of eligible hedging instruments and eligible hedged items, where there is a formal
Skanska Annual Report 2017 109Notes including accounting and valuation principles
designation and documentation for the hedging relationship and the entity’s risk
management objective and strategy for undertaking the hedge, and where the
effectiveness requirement for hedges has been met. The effectiveness require-
ment is met when there is an economic relationship between the hedged item
and the hedging instrument, the effect of credit risk does not dominate the value
changes that result from the economic relationship, and the hedge ratio of the
hedging relationship is the same as that actually used in the economic hedge, and
the quantity the entity actually uses to hedge the amount of the hedged item.
Skanska uses hedge accounting for cash flow hedging and hedging of net
investment in foreign operations. Hedge accounting is used for cash flow hedges
when a future cash flow is attributable to a recognized asset or liability or a highly
probably future transaction. Hedge accounting for hedging of net investments in
foreign operations is applied when the net investment is in line with IAS 21.
A cash flow hedge is recognized as follows:
a) the separate component in equity which is linked to the hedged item is to be
adjusted to the lower of the following: the cumulative gains or losses from
the hedging instrument from the date the hedge was entered into or the
cumulative change in fair value for the hedged item from the date the hedge
was entered into;
b) the portion of the gain or loss for a hedging instrument that has been
determined to be an effective hedge is recognized in other comprehensive
income;
c) the remaining gain or loss for the hedge instrument is hedging ineffective-
ness that is to be recognized through profit or loss;
d) the amount accumulated in the provision derived from the cash flow hedged
in accordance with a) is to be recognized as follows:
i) if a hedged forecast transaction subsequently leads to recognition of
a non-financial asset or liability, or a hedged forecast transaction for a
non-financial asset or liability becomes a binding commitment for which
hedge accounting of fair value is used, the entity is to deduct this from the
provision originating from the cash flow hedge and include it directly in
the initial cost or other recognized value for the asset or liability;
ii) for all cash flow hedges except those covered by i) this amount is to be re-
classified from the provision originating from the cash flow hedge to profit
or loss as a reclassification adjustment in the same period or periods during
which the hedged expected future cash flows affect profit or loss;
iii) if this amount is a loss and an entity is expecting all or part of the loss to be
recovered during one or more future periods, the amount expected to be
recovered is to be immediately reclassified to profit or loss as a reclassifica-
tion adjustment.
Hedging of net investments in foreign operations, including a hedge of a mon-
etary item that is recognized as part of a net investment, is to be recognized in a
similar way to cash flow hedges: the portion of the gain or loss for the hedging in-
strument that is determined to be an effective hedge is to be recognized through
other comprehensive income, and the ineffective portion is to be recognized
through profit or loss. The cumulative gain or loss for the hedging instrument that
is attributable to the effective portion of the hedge and that has accumulated in
the currency translation reserve is to be reclassified from equity to profit or loss
upon disposal or partial disposal of the foreign operations.
IFRS 7 Financial Instruments: Disclosures The company provides disclosures that enable the evaluation of the significance
of financial instruments for the entity’s financial position and performance. The
disclosures also enable an evaluation of the nature of financial instruments and
risks associated with them to which the company has been exposed during the
period and is exposed to at the end of the reporting period. These disclosures also
provide a basis for assessing how these risks are managed by the company. This
standard supplements the principles for recognizing, measuring and classifying
financial assets and liabilities in IAS 32 and IAS 39.
The standard applies to all types of financial instruments, with the primary
exception of holdings in subsidiaries, associated companies and joint ventures, as
well as obligations for employee benefit plans in compliance with IAS 19, such as
pension plans. The disclosures that are provided thus include accrued interest in-
come, deposits and accrued interest expense. Accrued income relating to contract
clients is not a financial instrument.
The disclosures provided are supplemented by reconciliation with other items
in the income statement and in the statement of financial position.
Disclosures in compliance with this accounting standard are presented in Note 6.
IAS 20 Accounting for Government Grants and Disclosure of Govern-ment Assistance“Government assistance” refers to action by the government designed to provide
an economic benefit specific to one company or a category of companies that
qualify based on certain criteria. Government grants are assistance from the
government in the form of transfers of resources to a company in return for past
or future compliance with certain conditions relating to its operations.
Government grants are recognized as prepaid income or a reduction of an
investment when there is reasonable assurance that the grants will be received
and that the Group will meet the criteria for receiving the grant.
The Swedish Financial Reporting Board’s recommendation RFR 1 Supplementary Accounting Rules for GroupsThe recommendation specifies what further disclosures must be provided in order
for the annual accounts to comply with Sweden’s Annual Accounts Act. The ad-
ditional information mainly relates to disclosures on employees.
Disclosures on the number of employees, gender distribution and distribution
among countries are provided in Note 36. The number of employees during the
year was calculated as an average of the average number of employees during
the quarters in the year. In this calculation, part-time employment is equivalent to
60 percent of full-time employment. Operations divested during the year are not
included.
Information on the gender distribution among senior executives refers to the
situation on the closing day. “Senior executives” in the various subsidiaries refers
to the members of the management teams of the respective Business Units. This
information is provided in Notes 36 and 37.
In addition to Board members and the President and CEO, all other persons in
the Group Leadership Team must be included in the group for which a separate
account is to be provided of the total amounts of salaries and other remunera-
tion, as well as expenses and obligations related to pensions and similar benefits.
Furthermore, the same disclosures must be provided individually for each of the
Board members and for the President and CEO, as well as individuals previously
holding these positions. Employee representatives are exempted.
Note 36 provides information about loans, assets pledged and contingent
liabilities on behalf of Board members and of Presidents and CEOs within the
Group.
Information must also be provided on fees to auditors and the accounting firms
where the auditors work. See Note 38.
Order bookings and order backlogIn contracting assignments, an order booking refers to a written order confirma-
tion or signed contract, provided that financing has been arranged and construc-
tion is expected to commence within 12 months. If a previously received order
is canceled in a subsequent quarter, the cancellation is recognized as a negative
item when reporting order bookings for the quarter when the cancellation
occurs. Reported order bookings also include orders from Residential Develop-
ment and Commercial Property Development, which presupposes that building
permits are in place and construction is expected to begin within three months.
For services related to fixed-price work, the order booking is recorded when the
contract is signed, and for services related to cost-plus work, the order booking
corresponds to revenue. For service agreements, a maximum of 24 months of
future revenue is included.
No order bookings are reported in Residential Development and Commercial
Property Development.
Order backlog refers to the difference between order bookings for a period
and accrued revenue (accrued project expenses plus accrued project revenue
adjusted for loss provisions) plus order backlog at the beginning of the period.
The order backlog in the accounts of acquired subsidiaries on the date of acqui-
sition is not reported as order bookings, but is included in order backlog amounts.
Market appraisalCommercial Property DevelopmentNote 22 provides the estimated market value of Skanska’s current-asset proper-
ties. For completed commercial properties and for development properties, the
market value for the majority of properties has been calculated in cooperation
with external appraisers. The value of ongoing projects is measured internally.
The calculated market value of ongoing projects refers to each property once it is
completed and fully occupied.
Skanska Annual Report 2017110 Notes including accounting and valuation principles
Note 2. Key estimates and judgements
Key estimates and judgmentsThe Group Leadership Team has discussed with the Board of Directors and the
Audit Committee the developments and disclosures relating to the Group’s
important accounting principles and estimates, as well as the application of these
principles and estimates.
Some important accounting-related estimates that were made when applying
the Group’s accounting principles are described below.
Goodwill impairment testingWhen calculating the recoverable amount of cash-generating units to determine
if there is any goodwill impairment, several assumptions about future conditions
and estimates of parameters have been made. These are presented in Note 18
Goodwill. As understood from the description in this note, important changes in
the basis for these assumptions and estimates might have a substantial effect on
the value of goodwill.
Note 1. Parent Company accounting and valuation principles
The Parent Company has prepared its annual accounts in compliance with the An-
nual Accounts Act and the Swedish Financial Reporting Board’s Recommendation
RFR 2, “Accounting for Legal Entities.” According to RFR 2, the annual accounts
of the legal entity must apply the International Financial Reporting Standards
(IFRS) and International Accounting Standards (IAS) issued by the International
Accounting Standards Board (IASB), to the extent these have been approved by
the EU, as well as the interpretations by the IFRS Interpretations Committee and
its predecessor the Standing Interpretations Committee (SIC), as far as this is pos-
sible within the framework of the Annual Accounts Act and taking into account
the connection between accounting and taxation. A presentation of the various
accounting standards can be found in the Group Note 1. The statements of the
Swedish Financial Reporting Board must also be applied.
In accordance with RFR 2, IAS 39 is not applied to financial guarantee agree-
ments benefiting subsidiaries, associated companies and joint ventures. Instead,
IAS 37 is applied, which normally means that provisions for these measures are
not recognized since it is unlikely that an outflow of resources will be required to
settle the obligation.
Group contributions are recognized in accordance with the general rule in RFR 2.
The Seop 3 and Seop 4 employee ownership programs are recognized as
share-based payment settled with equity instruments, in compliance with IFRS
2. The portion of the Group’s expense for these employee ownership programs
that relates to employees of subsidiaries is recognized in the Parent Company as
an increase in the carrying amount of holdings in subsidiaries and an increase in
equity. When the amount to be debited to the subsidiary is established, a transfer
of receivables to subsidiaries takes place. Where compensation from subsidiaries
for shares that have been allocated deviates from the previously reported increase
in the carrying amount of holdings in subsidiaries, the carrying amount of hold-
ings in subsidiaries is reduced to the portion of the amount that does not exceed
the previously reported increase. Any remaining portion of the compensation is
recognized directly as equity.
Important differences compared to consolidated accounting principlesThe income statement and balance sheet conform to the presentation formats in
the Annual Accounts Act.
Defined-benefit pension plans are reported according to the regulations in the
Pension Obligations Vesting Act. Pension obligations secured by assets in pension
funds are not recognized in the balance sheet.
Similar to holdings in subsidiaries, holdings in associated companies and joint
arrangements are also carried at cost before any impairment losses.
Note 1. Continued
Residential DevelopmentIn appraising properties in Residential Development, estimates of market value
take into account the value that can be obtained within the usual economic cycle
and refers to properties once they are completed.
Infrastructure DevelopmentSkanska obtains an estimated value for infrastructure projects by discounting
estimated future cash flows in the form of dividends and repayments of loans and
equity by a discount rate based on country, risk model and project phase for vari-
ous projects. The discount rate chosen is applied to all future cash flows starting
on the appraisal date. This is based on the most recently updated financial model.
This financial model describes all cash flows in the project and serves as the
ultimate basis for financing, which is carried out with full project risk and without
guarantees from Skanska.
An estimated value is stated solely for projects that have reached contractual
and financial close. All flows are appraised: investments in the project (equity and
subordinated debenture loans), interest on repayments of subordinated loans, as
well as dividends to and from the project company. Today all investments except
New Karolinska Solna are denominated in currencies other than Swedish kronor,
and there is thus also an exchange rate risk.
Estimated values have in part been calculated in cooperation with external
appraisers and are stated in Note 20.
Skanska Annual Report 2017 111Notes including accounting and valuation principles
Note 2. Continued
Pension assumptionsSkanska has defined-benefit pension plans in a number of countries. The plans
are recognized according to IAS 19, which means that pension commitments
are calculated using actuarial assumptions and that plan assets are measured at
market value on the closing day. The effects of changed actuarial assumptions
and changes in the market value of plan assets are recognized as remeasurements
in other comprehensive income. The remeasurements impact interest-bearing
pension liabilities and equity.
The assumptions and prerequisites that provide the basis for recognition of
pension liability, including a sensitivity analysis, are presented in Note 28 Pensions.
Percentage-of-completion method Skanska applies the percentage-of-completion method. This means that, based
on a prognosis of final project results, income is recognized successively during
the course of the project according to degree of completion. In order to do this,
the amount of project revenue and project expenses must be able to be reliably
determined. This in turn requires that the Group has efficient, coordinated
systems for calculation, forecasting and revenue/expense reporting. The method
also requires consistent assessment (forecasts) of the final outcome of the project,
including analysis of deviations from earlier assessments. This critical assessment
is performed at least once every quarter. However, actual future project outcomes
may deviate, either positively or negatively, from this assessment.
Disputes Although management’s best judgment is used in reporting disputed amounts,
the actual future outcomes may deviate from the judgments made. See Note 33
Assets pledged, contingent liabilities and contingent assets, and Note 29 Provi-
sions.
Investments in Infrastructure DevelopmentThe estimated investment amounts are provided in Note 20 B. Estimated market
value is based on discounting anticipated cash flows for each respective invest-
ment. Estimated yield requirements on investments of this type have been used
as discount rates. Changes in anticipated cash flows, which in a number of cases
extend 20 to 30 years into the future, and/or changes in yield requirements, may
materially affect both estimated values and carrying amounts for each invest-
ment.
Current-asset propertiesThe stated combined market value in Note 22 is calculated on the basis of prevail-
ing price levels in the respective location of the individual properties. Changes in
the supply of similar properties, as well as changes in demand due to new yield
requirements, may materially affect both estimated market values and carrying
amounts for each property.
In Commercial Property Development, the estimated market value for ongoing
projects is assessed for each property once it is completed and fully occupied.
In Residential Development the supply of capital and the price of capital for
financing home buyers’ investments are critical factors. Here too, the market
value assessed is the value of the properties once they are completed and taking
into account the value that may be added in a normal economic cycle.
Prices of goods and servicesIn the Skanska Group’s operations, there are many different forms of contractual
mechanisms. The degree of risk associated with the price of goods and services
varies greatly depending on the contract type.
Sharp increases in material prices may pose a risk, particularly to long-term proj-
ects with fixed-price commitments. A shortage of human resources and certain
input goods may also adversely impact operations. Delays in the design phase or
changes in design are other circumstances that may adversely affect projects.
Note 3. Effects of changes in accounting principles
No changed accounting principles in 2017.
Note 4. Operating segments
Skanska’s business streams – Construction, Residential Development, Commer-
cial Property Development and Infrastructure Development – are recognized as
operating segments. These business streams coincide with Skanska’s operational
organization, used by the Group Leadership Team to monitor operations. The
Group Leadership Team is also Skanska’s “chief operating decision maker.”
Each business stream carries out distinct types of operations with different
risks. Construction includes both building construction and civil construction.
Residential Development develops residential projects for immediate sale. Homes
are adapted for selected customer categories. The units in this segment are
responsible for planning and selling their projects. The construction assignments
are performed by construction units in the Construction business stream in
each respective market. Commercial Property Development initiates, develops,
leases and divests commercial property projects. Project Development focuses
on office buildings, retail and logistics properties. Construction assignments are
performed in most markets by Skanska’s Construction segment. Infrastructure
Development specializes in identifying, developing and investing in privately
financed infrastructure projects, such as highways, hospitals and airports. The
business stream focuses on creating new potential projects, mainly in the markets
where the Group has operations. Construction assignments are performed by
the construction units where Skanska has construction operations. Intra-Group
pricing between operating segments occurs on market terms. “Central” includes
the cost of Group headquarters, earnings of central companies and operations
that are being discontinued. Eliminations consist mainly of profits in Construction
operations related to property projects. See also Note 1 Consolidated accounting
and valuation principles, IFRS 8, Operating Segments.
Revenue and expenses by operating segmentEach business stream has operating responsibility for its income statement down
through “operating income.”
Assets and liabilities by operating segmentEach business stream has operating responsibility for its capital employed. The
capital employed by each business stream consists of its total assets minus tax
assets and intra-Group receivables invested in Skanska’s treasury unit (“internal
bank”) less non-interest-bearing liabilities excluding tax liabilities. In the calcula-
tion of capital employed, a capitalized interest expense is removed from total
assets for the Residential Development and Commercial Property Development
segments. Acquisition goodwill has been reported in the business stream to
which it belongs.
Cash flow by segment is presented as a separate statement: Consolidated oper-
ating cash flow statement and change in interest-bearing net receivables.
Skanska Annual Report 2017112 Notes including accounting and valuation principles
2017Construc-
tion
Residential Develop-
ment
Commercial Property Develop-
ment
Infrastruc-ture Develop-
ment
Total operating segments Central
Elimina-tions
Total segments
Reconcili-ation with
IFRSs Total IFRS
External revenue 135,997 13,158 11,255 81 160,491 332 0 160,823 –2,946 157,877
Intra-Group revenue 14,053 79 185 0 14,317 1,032 –15,349 0 0 0
Total revenue 150,050 13,237 11,440 81 174,808 1,364 –15,349 160,823 –2,946 157,877
Cost of sales –141,751 –10,855 –8,451 –177 –161,234 –1,275 15,209 –147,300 2,197 –145,103
Gross income 8,299 2,382 2,989 –96 13,574 89 –140 13,523 –749 12,774
Selling and administrative expenses –7,132 –666 –899 –121 –8,818 –1,033 0 –9,851 0 –9,851
Income from joint ventures and associated companies 38 0 624 1,142 1,804 0 28 1,832 –177 1,655
Operating income 1,205 1,716 2,714 925 6,560 –944 –112 5,504 –926 4,578
of which depreciation/amortization –1,478 –1 –6 –3 –1,488 –99 –1,587 0 –1,587
of which impairment losses/reversals of impairment losses
Goodwill –592 –592 –592 0 –592
Other assets –265 –14 –6 –11 –296 13 –283 0 –283
of which gains from commercial prop-erty divestments 2,879 2,879 197 3,076 –370 2,706
of which gains from infrastructure project divestments 985 985 985 0 985
Employees 39,002 482 389 94 39,967 792 40,759
Gross margin, % 5,5 18,0
Selling and administrative expenses, % –4,8 –5,0
Operating margin, % 0,8 13,0
Assets, of which
Property, plant and equipment 6,771 5 19 9 6,804 86 –16 6,874 0 6,874
Intangible assets 4,770 409 7 5,186 330 5,516 0 5,516
Investments in joint ventures and as-sociated companies 218 527 658 1,944 3,347 3 –36 3,314 0 3,314
Current-asset properties 11 15,505 24,043 39,559 –91 –458 39,010 0 39,010
Capital employed –2,761 12,652 24,481 1,809 36,181 7,930 44,111 0 44,111
Investments –2,062 –11,093 –10,716 –449 –24,320 45 90 –24,185 0 –24,185
Divestments 237 11,773 9,341 1,950 23,301 0 –202 23,099 0 23,099
Net investments –1,825 680 –1,375 1,501 –1,019 45 –112 –1,086 0 –1,086
Reconciliation from segment reporting to IFRSRevenue according to segment reporting – binding agreement 150,050 13,237 11,440 81 174,808 1,364 –15,349 160,823
Plus properties sold before the period 14,070 3,120 17,190 17,190
Less properties not yet occupied by the buyer on closing day –14,646 –5,116 –19,762 79 –19,683
Proportional method for joint ventures –875 –875 313 –562
Exchange-rate differences 37 72 109 109
Revenue according to IFRS – handover 150,050 11,823 9,516 81 171,470 1,364 –14,957 157,877
Operating income according to segment reporting – binding agreement 1,205 1,716 2,714 925 6,560 –944 –112 5,504
Plus properties sold before the period 2,237 627 2,864 2 2,866
Less properties not yet occupied by the buyer on closing day –2,316 –951 –3,267 –12 –3,279
Adjustment, income from joint ventures and associated companies –78 –338 –416 –18 –434
New intra-Group profits –47 –47
Exchange-rate differences –51 15 –36 1 3 –32
Operating income according to IFRS – handover 1,205 1,508 2,067 925 5,705 –943 –184 4,578
Note 4. Continued
Skanska Annual Report 2017 113Notes including accounting and valuation principles
Note 4. Continued
2016Construc-
tion
Residential Develop-
ment
Commercial Property Develop-
ment
Infrastruc-ture Develop-
ment
Total operating segments Central
Elimina-tions
Total segments
Recon-ciliation with
IFRSs Total IFRS
External revenue 127,113 13,255 10,208 237 150,813 494 0 151,307 –5,942 145,365
Intra-Group revenue 10,888 9 18 0 10,915 943 –11,858 0 0 0
Total revenue 138,001 13,264 10,226 237 161,728 1,437 –11,858 151,307 –5,942 145,365
Cost of sales –127,921 –11,100 –7,159 –181 –146,361 –1,449 11,892 –135,918 4,799 –131,119
Gross income 10,080 2,164 3,067 56 15,367 –12 34 15,389 –1,143 14,246
Selling and administrative expenses –6,567 –559 –751 –147 –8,024 –1,128 0 –9,152 0 –9,152
Income from joint ventures and associated companies 33 0 20 1,909 1,962 0 0 1,962 164 2,126
Operating income 3,546 1,605 2,336 1,818 9,305 –1,140 34 8,199 –979 7,220
of which depreciation/amortization –1,348 –1 –3 –4 –1,356 –83 –1,439 0 –1,439
of which impairment losses/reversals of impairment losses
Goodwill 0 0 0 0
Other assets 8 –42 –198 –331 –563 29 –534 0 –534
of which gains from commercial prop-erty divestments 3,111 3,111 173 3,284 17 3,301
of which gains from infrastructure project divestments 1,729 1,729 1,729 0 1,729
Employees 40,991 434 364 102 41,891 1,012 42,903
Gross margin, % 7,3 16,3
Selling and administrative expenses, % –4,8 –4,2
Operating margin, % 2,6 12,1
Assets, of which
Property, plant and equipment 6,691 23 12 13 6,739 98 6,837 0 6,837
Intangible assets 5,494 429 5,923 381 6,304 0 6,304
Investments in joint ventures and as-sociated companies 205 440 847 2,701 4,193 4 –37 4,160 0 4,160
Current-asset properties 47 14,011 20,000 34,058 –93 –287 33,678 0 33,678
Capital employed –53 11,607 19,936 5,434 36,924 5,681 42,605 0 42,605
Investments –1,829 –9,148 –8,364 –1,336 –20,677 –122 0 –20,799 0 –20,799
Divestments 595 7,517 9,043 3,102 20,257 694 –9 20,942 0 20,942
Net investments –1,234 –1,631 679 1,766 –420 572 –9 143 0 143
Reconciliation from segment reporting to IFRSRevenue according to segment reporting – binding agreement 138,001 13,264 10,226 237 161,728 1,437 –11,858 151,307
Plus properties sold before the period 9,704 2,561 12,265 0 12,265
Less properties not yet occupied by the buyer on closing day –14,070 –3,120 –17,190 –17,190
Proportional method for joint ventures –1,548 –1,548 266 –1,282
Exchange-rate differences 221 44 265 265
Revenue according to IFRS – handover 138,001 7,571 9,711 237 155,520 1,437 –11,592 145,365
Operating income according to segment reporting – binding agreement 3,546 1,605 2,336 1,818 9,305 –1,140 34 8,199
Plus properties sold before the period 1,480 482 1,962 9 1,971
Less properties not yet occupied by the buyer on closing day –2,237 –627 –2,864 –2 –2,866
Adjustment, income from joint ventures and associated companies –133 0 –133 –133
New intra-Group profits 14 14
Exchange-rate differences 31 8 39 –1 –3 35
Operating income according to IFRS – handover 3,546 746 2,199 1,818 8,309 –1,141 52 7,220
Skanska Annual Report 2017114 Notes including accounting and valuation principles
Note 5. Non-current assets held for sale and discontinued operation
Non-current assets held for sale and discontinued operations are recognized
in compliance with IFRS 5. See Note 1 Accounting and valuation principles. No
operations were recognized as discontinued in 2017 or 2016.
At the end of 2017, there were no non-current assets that were recognized
in compliance with IFRS 5 as current assets and specified as assets held for sale.
Neither were there any such non-current assets in 2016.
Non-current assets and current-asset properties by geographical area
Property plant and equipment Intangible assets 1
Investments in joint ventures and associated companies Current-asset properties
2017 2016 2017 2016 2017 2016 2017 2016
Sweden 2,084 1,962 635 590 1,312 1,210 12,704 13,124
USA 2,320 2,451 984 1,514 1,765 2,338 7,383 4,932
Other 2,470 2,424 3,897 4,200 237 612 18,923 15,622
6,874 6,837 5,516 6,304 3,314 4,160 39,010 33,678
1 Of the “Other areas” item for intangible assets, SEK 1,344 M (1,415) was from Norwegian operations and SEK 1,503 M (1,585) from UK operations.
External revenue according to IFRS by geographical area
Sweden USA Other areas Total
2017 2016 2017 2016 2017 2016 2017 2016
Construction 27,801 26,321 58,781 52,457 49,728 48,601 136,310 127,379
Residential Development 7,291 4,007 4,533 3,555 11,824 7,562
Commercial Property Development 5,010 3,481 103 4,022 4,218 2,190 9,331 9,693
Infrastructure Development 12 17 41 174 28 46 81 237
Central and eliminations 331 494 331 494
Total operating segments 40,114 33,826 58,925 56,653 58,838 54,886 157,877 145,365
The Group has no customers that account for 10 percent or more of its revenue.
Note 4. Continued
Skanska Annual Report 2017 115Notes including accounting and valuation principles
Note 6. Financial instruments and financial risk management
Financial instruments are reported in compliance with IAS 39 Financial Instruments:
Recognition and Measurement, IAS 32 Financial Instruments: Presentation and
IFRS 7 Financial Instruments: Disclosures.
Skanska’s receivables from and liabilities to customers for contract work are
not recognized as a financial instrument and the risk associated with these receiv-
ables and liabilities is thus not reported in this note.
Risks in partly-owned joint venture companies in Infrastructure Development
are managed in each respective company. Skanska’s aim is to ensure that financial
risk management within these companies is equivalent to that which applies to
the Group’s wholly owned companies. Management of the interest rate risk in
financing is essential in each respective company, because the contract period in
many cases amounts to decades. This risk is managed with the help of long-term
interest rate swaps. These holdings are reported according to the equity method
of accounting. As a result, the financial instruments in each company are included
under the item “Income from joint ventures and associated companies.” Informa-
tion on financial instruments in associated companies and joint ventures is not
included in the following disclosures.
Financial Risk ManagementThrough its operations, aside from business risk, Skanska is exposed to various
financial risks such as credit risk, liquidity risk and market risk. These risks arise
in the Group’s reported financial instruments such as cash and cash equivalents,
interest-bearing receivables, trade accounts receivable, trade accounts payable,
borrowings and derivatives.
Objectives and policyThe Group endeavors to achieve a systematic assessment of both financial and
business risks. To do this a common risk management model is used. The risk
management model does not involve avoidance of risk, but is instead aimed at
identifying and managing these risks.
Through the Group’s Financial Policy, each year the Board of Directors estab-
lishes guidelines, objectives and limits for financial management and adminis-
tration of financial risk within the Group. This policy document regulates the
distribution of responsibility among Skanska’s Board, the Group Leadership Team,
Skanska Financial Services (Skanska’s internal financial unit) and the Business
Units. Within the Group, Skanska Financial Services has operational responsibil-
ity for securing Group financing and for managing liquidity, financial assets and
financial liabilities. A centralized financial unit enables Skanska to take advantage
of economies of scale and synergies. The objectives and policy for each type of
risk are described in the respective sections below.
Credit riskCredit risk describes the Group’s risk from financial assets and arises if a counter-
party does not fulfill its contractual payment obligations to Skanska. Credit risk
is divided into financial credit risk, which is risk associated with interest-bearing
assets, and customer credit risk, which is risk relating to trade accounts receivable.
Financial credit risk – risk in interest-bearing assetsFinancial credit risk is the risk that the Group is exposed to in its relationships
with financial counterparties when investing surplus funds and with respect to
bank account balances and investments in financial assets. Credit risk also arises
when using derivative instruments and is the risk that a potential gain will not
be realized if the counterparty does not fulfill its part of the contract. In order to
reduce the credit risk related to derivatives, Skanska has signed standardized net-
ting (ISDA) agreements with all financial counterparties with which it enters into
derivative contracts.
Skanska must, according to the policy, limit its exposure to financial counter-
parties by using banks and financial institutions assigned a satisfactory rating
by Standard & Poor’s, Moody’s or Fitch. The permitted exposure volume per
counterparty is dependent on the counterparty’s credit rating and the maturity of
the exposure. To reduce the credit risk associated with derivative instruments, the
Group has also signed standardized netting agreements (ISDA agreements) with
all financial counterparties with whom Skanska has entered into derivative con-
tracts. When investing in surplus funds the objective is to always achieve good risk
diversification. As of the end of the year the surplus funds were primarily invested
with larger banks with a global presence , mainly from the Nordic region, Europe
and USA. Skanska currently uses around 10 banks for derivative transactions.
Maximum exposure is equivalent to the fair value of the assets and amounts to
SEK 15,903 M (16,497). The average maturity of interest-bearing assets amounted
to 0.3 (0.2) years as of December 31, 2017.
Customer credit risk - risk in trade accounts receivableCustomer credit risk is managed through Skanska Group’s common procedures
for identifying and managing risk: the Skanska Tender Approval Procedure (STAP)
and the Operational Risk Assessment (ORA) of varying sizes and types with nu-
merous customer categories in a large number of geographical markets.
The part of Skanska’s operations related to construction projects extends only
limited credit, since projects are invoiced in advance as much as possible. In other
operations, the extension of credit is limited to customary invoicing periods.
Trade accounts receivable Dec 31, 2017 Dec 31, 2016
Outstanding receivables 20,684 24,360
Impairment losses –435 –545
Carrying amount 20,249 23,815
Change in impairment losses, trade accounts receivable 2017 2016
January 1 545 1,071
Impairment loss/reversal of impairment loss for the year 170 –373
Impairment losses settled –287 –187
Exchange-rate differences 7 34
December 31 435 545
Risk in other receivables including sharesOther financial operating receivables consist of receivables for properties di-
vested, accrued interest income, deposits etc.
On the closing day no operating receivables were past due and there were no
impairment losses.
Other financial operating receivables are reported by time interval with respect
to when the amounts fall due in the future.
2017 2016
Due within 30 days 22 9
Due in over 30 days but within one year 1,028 83
Due after one year 14 5
Total 1,064 97
Holdings with less than 20 percent of voting power in a company are reported as
shares. Their carrying amount is SEK 42 M (44).
The shares are recognized at the lower of cost and fair value. No impairment
losses were recognized on shares in either 2017 or 2016.
Liquidity and refinancing riskLiquidity and refinancing risk is defined as the risk of Skanska not being able
to meet its payment obligations due to lack of liquidity or due to difficulties in
obtaining or rolling over external loans.
The Group uses liquidity forecasting as a means of managing the fluctuations
in short-term liquidity. Surplus liquidity is, if possible, to be used primarily to repay
the principal on loan liabilities.
FundingSkanska has several borrowing programs, both committed bank credit facilities
and market funding programs, which provide good preparedness for temporary
fluctuations in the Group’s short-term liquidity requirements and ensure long-
term funding.
Skanska Annual Report 2017116 Notes including accounting and valuation principles
In 2017 Skanska refinanced the syndicated bank loan. The new EUR 600 M Credit
Facility has a term of five years with an option to extend it twice, for one year in
each case, after the first and second years respectively. In addition, a syndicated
credit facility with a green profile was established. The EUR 200 M facility has a
term of two years with an option to extend it for a further one year. To extend
the maturity profile of the debt portfolio and secure access to USD, a bilateral
loan was taken during the year from Svensk Exportkredit (SEK) of USD 100 million
maturing in 2024 as well as two bilateral loans from Nordiska Investeringsbanken
(NIB) of USD 50 million each maturing in 2023 and 2024 respectively.
No new MTN loans were issued in 2017. Short-term liquidity requirements due
to seasonal variation in cash flow were covered by borrowing via the certificate
program. There were no certificates outstanding as of December 31, 2017.
At the end of the year the central debt portfolio amounted to SEK 4.6 (4.2)
billion. The unutilized credit facilities of just over SEK 8 (5.7) billion combined with
the operating financial net assets of SEK 9.7 (10.6) billion ensure that the Group
has sufficient financial capacity.
2017 2016
Maturity Currency Limit Nominal Utilized Nominal Utilized
Market funding programsCommercial paper (CP) program, maturities 0–1 years SEK/EUR SEK 6,000 M 6,000 6,000 1,315
Medium Term Note (MTN) program, maturities 1–10 years SEK/EUR SEK 8,000 M 8,000 2,350 8,000 2,349
14,000 2,350 14,000 3,664
Note 6. Continued
Committed credit facilities
Green syndicated bank loan 2019 SEK/EUR/USD SEK 200 M 1,967
Syndicated bank loan 2022 SEK/EUR/USD EUR 600 M 5,901 5,312
Bilateral loan agreement 2020 EUR EUR 60 M 590 590 574 574
Bilateral loan agreements 2023/2024 USD USD 200 M 1,638 1,638
Other credit facilities 413 401
10,509 2,228 6,287 574
At year-end 2017, the Group’s unutilized credit facilities totaled SEK 8,281 M (5,713).
Skanska Annual Report 2017 117Notes including accounting and valuation principles
The average maturity of interest-bearing liabilities amounted to 1.8 (1.1) years.
2017 Maturity 2016 Maturity
Maturity period Carryingamount
Futurepayment amount
Within3 months
After 3 months
within 1 years
After 1 yearwithin 5 years
After 5 years Maturity period
Carryingamount
Futurepayment amount
Within3 months
After 3 months
within 1 years
After 1 yearwithin 5 years
After 5 years
Interest-bearing financial liabilities 11,323 11,800 1,046 6,743 2,269 1,742
Interest-bearing financial li-abilities 10,172 10,309 1,689 5,041 3,572 7
Derivatives: Currency forward contracts
Derivatives: Currency forward contracts
Inflow –99 –10,296 –9,924 –330 –42 Inflow –177 –4,342 –4,085 –255 –2
Outflow 97 10,292 9,920 331 41 Outflow 48 4,295 4,046 247 2
Derivatives: Inter-est rate swaps
Derivatives: Inter-est rate swaps
Inflow –1 –5 4 –9 Inflow 10 8 2
Outflow 59 63 24 25 14 Outflow 116 108 24 32 52
Total 11,379 11,854 1,066 6,773 2,273 1,742 Total 10,159 10,380 1,674 5,073 3,626 7
Liquidity reserve and maturity structureThe objective is to have a liquidity reserve of at least SEK 4 billion available within
one week in the form of cash liquidity or committed credit facilities. At year-end
2017, cash and cash equivalents and committed credit facilities amounted to
about SEK 15 (11) billion, of which about SEK 12 (10) billion is available within one
week.
The Group’s policy is for the central borrowing portfolio’s maturity structure
to be distributed over time and for the portfolio to have a weighted average
residual term of three years, including unutilized committed credit facilities, with
authorization to deviate within a two to four year interval. On December 31, 2017
the average maturity of the borrowing portfolio was 3.5 (2.0) years, if unutilized
credit facilities are taken into account.
Including interest payments, the maturity structure of the Group’s financial
interest-bearing liabilities and derivatives related to borrowing is distributed over
the next few years according to the following table.
Note 6. Continued
Skanska Annual Report 2017118 Notes including accounting and valuation principles
Note 6.Continued
Other operating liabilitiesOther operating liabilities that consist of financial instruments fall due for pay-
ment according to the table below.
Other operating liabilities 2017 2016
Due within 30 days 494 569
Due in over 30 days but within one year 112
Due after one year 2 13
Total 496 694
Market riskMarket risk is the Group’s risk that the fair value of financial instruments or future
cash flows from financial instruments will fluctuate due to changes in market
prices. The main market risks in the consolidated accounts are interest rate risk
and foreign exchange rate risk.
Interest rate riskInterest rate risk is the risk that changes in interest rates will adversely affect the
Group’s financial items and cash flow (cash flow risk) or the fair value of financial
assets and liabilities (fair value interest risk).
For the Group, exposure to fair value interest risk arises primarily from interest-
bearing borrowing. To limit the risk, interest rate maturities are to be distributed
over time and have a weighted average remaining fixed interest period of two
years, with authorization to deviate in +/–1 year. Change in fair value is measured
on interest-bearing assets and liabilities including derivatives, partly by increasing
the interest rate by one percentage point across all maturities and partly through
a positive or negative change in the interest rate by half a percentage point. The
change in fair value may not exceed SEK 150 M for any of these interest rate
scenarios measured as relative deviation against a comparative portfolio with a
weighted average fixed interest period of two years, which has been identified as
a risk-neutral maturity.
In the interest rate scenarios described above, the fair value of interest-bearing
financial assets and liabilities, plus derivatives, would change within the range of
SEK 38–61 M, assuming that the volume and fixed interest period is the same as
of December 31, 2017.
The relative interest rate risk is SEK 8–9 M lower than in a comparative port-
folio with a risk of around SEK 46–70 M and is attributable to the fact that the
fixed interest period is shorter than the comparative portfolio’s two years. The
change in fair value would impact net financial items in the amount of around
SEK 20–24 M and other comprehensive income by around SEK 18–37 M, where
hedge accounting is applied. All amounts are stated before tax. Equity would
those be affected by around SEK 30–48 M taking tax into account.
The Group’s cash flow risk must not exceed SEK 150 M over a 12-month period
in the event of an increase of one percentage point in market interest rates. As-
suming the volume and fixed interest period are the same as of year-end, an aver-
age increase in the market interest rate of one percentage point from the level
at the end of the year would result in an estimated positive effect on the Group’s
financial items of around SEK 41 M for 2018.
The deviation of cash flow risk, fair value interest rate risk and the fixed interest
period are all within the authorized limits for the Group as of December 31, 2017.
The average fixed interest period for all of the Group’s interest-bearing assets
was 0.1 (0.1) years, taking derivatives into account. The interest rate for these was
0.63 (0.58) percent at year-end. Of the Group’s total interest-bearing financial
assets, 23 (7) percent carry fixed interest rates and 77 (93) percent variable interest
rates.
The average fixed interest period for all interest-bearing liabilities, taking into
account derivatives but excluding pension liabilities, was 0.5 (0.6) years.
The interest rate for interest-bearing liabilities amounted to 1.43 (1.03) percent
at year-end. Taking into account derivatives, the interest rate was 1.75 (1.25)
percent. Of total interest-bearing financial liabilities, after taking into account
derivatives, 33 (52) percent carry fixed interest rates and 67 (48) percent variable
interest rates.
On December 31, 2017 there were outstanding interest rate swap contracts
amounting to a nominal value of SEK 3,585 M (3,836). All of the contracts were
entered into in order to swap the Group’s borrowing from variable to fixed inter-
est. Skanska applies hedge accounting for half of these interest rate swaps. The
hedges fulfill effectiveness requirements, which means that unrealized gains or
losses are recognized under “Other comprehensive income.” The fair value of
these hedges totaled SEK –36 M (–68) as of December 31, 2017. The fair value of
interest rate swaps for which hedge accounting is not applied totaled SEK –22 M
(–48) on December 31, 2017. For these interest rate swaps, changes in fair value
are recognized through profit or loss. There were also interest rate swap contracts
in partly owned joint venture companies.
Foreign exchange rate riskForeign exchange rate risk is defined as the risk of a negative impact on the
Group’s income statement and statement of financial position due to fluctuations
in exchange rates. This risk can be divided into transaction exposure, i.e. net op-
erating and financial (interest/principal payment) flows, and translation exposure
related to net investments in foreign subsidiaries.
Transaction exposureTransaction exposure arises in a local unit when the unit’s inflows and outflows of
foreign currencies are not matched. Although the Group has a large international
presence, its operations are mainly of a local nature in terms of foreign exchange
rate risks, because project revenue and costs are mainly denominated in the same
currency. If this is not the case, the objective is for each respective Business Unit
to hedge its exposure in contracted cash flows against its functional currency in
order to minimize the effect on earnings caused by shifts in exchange rates. The
main tool for this purpose is currency forward contracts.
The foreign exchange rate risk for the Group may amount to a total of SEK 50 M,
with risk calculated as the effect on earnings of a five percentage point shift in
exchange rates. As of December 31, 2017 foreign exchange rate risk accounted
for SEK 35 M (35) of transaction exposure before tax, which would affect other
comprehensive income in the amount of SEK 27 M (27) after tax.
Contracted net flows in currencies that are foreign for the respective Group
company break down in currencies and maturities as follows:
On Dec 31, 2017 On Dec 31, 2016
The Group’s contracted net foreign currency flowSEK M 1 2018 2019
2020 and later 2017 2018
2019 and later
PLN –2,729 –102 –1,446 –155 –283
EUR –504 –135 19 –413 54 –33
CZK –308 –82 –184 –58
USD –19 –6 –42 –1
RON –10 –9 –2 –6
HUF 123 –417 –217
GBP 225 –1 –107 –23 –1
Other currencies –8 4 –10 –1
Total equivalent value –3,231 –332 19 –2,621 –407 –317
1 Flows in PLN, CZK, HUF and RON are mainly related to property development project ex-penses. Flows in EUR are mainly attributable to Construction operations in Sweden, Poland, the Czech Republic and Norway. Flows in GBP are mainly related to a dividend as well as the flows attributable to the New Karolinska Hospital (NKS) and the construction of the pan-European research facility European Spallation Source (ESS).
Skanska Annual Report 2017 119Notes including accounting and valuation principles
Note 6. Continued
Currency
2017 2016
Net investments Hedges 1
Hedged portion, %
Net investments 2
Net investments, % 2
Net investments Hedges 1
Hedged portion, %
Net investments 2
Net investments, % 2
CZK 2,505 2,505 9 2,560 2,560 9
EUR 6,868 –4,324 63 2,544 9 5,843 –3,041 52 2,802 10
GBP 1,679 –255 15 1,424 5 3,577 –2,220 62 1,358 5
NOK 4,149 4,149 15 3,688 3,688 13
PLN 615 615 2 1,726 1,726 6
USD 8,912 –204 2 8,708 32 10,806 –120 1 10,686 39
Other foreign 614 613 2 618 618 2
Total foreign currencies 25,341 –4,783 19 20,558 76 28,817 –5,380 19 23,437 86
SEK and elimina-tions 6,506 24 3,913 14
Total 27,064 100 27,350 100
1 Hedged amount before subtracting hedged portion.2 After subtracting hedged portion.
Hedging of net investments outside Sweden
Hedge accounting is applied when hedging net investments outside Sweden. The
hedges fulfill effectiveness requirements, which means that gains or losses on
hedges are recognized in other comprehensive income until the hedged transac-
tion takes place, at which point the accumulated change in value is transferred to
the income statement.
See also Note 34 Foreign-exchange rates and effect of changes in foreign
exchange rates.
Skanska mainly uses hedge accounting to hedge expenses in currencies other
than EUR in its European property development operations.
The fair value of these hedges totaled SEK 70 M (-4) on December 31, 2017.
The hedges fulfill effectiveness requirements, which means that unrealized gains
or losses are recognized under “Other comprehensive income.” The fair value of
currency hedges for which hedge accounting is not applied totaled SEK 31 M (8)
on December 31, 2017, including the fair value of embedded derivatives. Changes
in fair value are recognized through profit or loss.
Information on the changes recognized in the consolidated income statement
and in other comprehensive income during the period can be found in the table
“Impact of financial instruments on the consolidated income statement, other
comprehensive income and equity”.
Translation exposureSkanska’s policy stipulates that net investments in Commercial Property Develop-
ment and Infrastructure Development operations are to be currency-hedged since
the intention is to sell these assets over time. These hedges consist of currency for-
ward contracts and foreign currency loans. The positive fair value of the currency
forward contracts amounts to SEK 14 M (105) and their negative fair value to
SEK 0 M (0). The fair value of foreign currency loans is SEK 607 M (590).
Net investments in other foreign subsidiaries are not normally hedged, unless
the Board of Directors of Skanska AB decides otherwise.
At year-end 2017, nearly 20 percent of net investments in foreign currency was
currency hedged. A change in the exchange rate where the Swedish krona falls/
rises by 10 percent against other currencies would have an effect of SEK +/– 2.2
billion on other comprehensive income after tax and taking hedges into account.
Skanska Annual Report 2017120 Notes including accounting and valuation principles
The significance of financial instruments to the Group’s financial position and incomeFinancial instruments in the statement of financial positionThe following table presents the carrying amount of financial instruments allocated by category as well as a reconciliation with total assets and liabilities in the
statement of financial position. Derivatives subject to hedge accounting are presented separately both as financial assets and financial liabilities.
See also Note 21 Financial assets, Note 24 Other operating receivables, Note 27 Financial liabilities and Note 30 Operating liabilities.
Assets
At fair value through
profit/lossHedge-accounted
derivativesHeld-to-maturity
investmentsAvailable-for-sale
assetsLoans and
receivablesTotal carrying
amount
2017
Financial instruments
Interest-bearing assets and derivatives
Financial assets 1
Financial investments at fair value 86 17 103
Financial investments at amortized cost 1,240 1,240
Financial interest-bearing receivables 7,562 7,562
86 17 1,240 0 7,562 8,905
Cash 6,998 6,998
86 17 1,240 0 14,560 15,903
Trade accounts receivable 2 20,249 20,249
Other operating receivables including shares
Shares recognized as available-for-sale assets 3 42 42
Other operating receivables 2, 4 1,064 1,064
0 0 0 42 1,064 1,106
Total financial instruments 86 17 1,240 42 35,873 37,258
2016
Financial instruments
Interest-bearing assets and derivatives
Financial assets 1
Financial investments at fair value 74 105 179
Financial investments at amortized cost 1,295 1,295
Financial interest-bearing receivables 9,593 9,593
74 105 1,295 0 9,593 11,067
Cash 5,430 5,430
74 105 1,295 0 15,023 16,497
Trade accounts receivable 2 23,815 23,815
Other operating receivables including shares
Shares recognized as available-for-sale assets 3 44 44
Other operating receivables 2, 4 97 97
44 97 141
Total financial instruments 74 105 1,295 44 38,935 40,453
The difference between fair value and carrying amount for financial assets is marginal.
1 The carrying amount of financial assets excluding shares, totaling SEK 8,905 M (11,067), can be seen in Note 21 Financial assets.2 See Note 24 Other operating receivables.3 The shares are recognized at the lower of cost and fair value. Shares are reported in the consolidated statement of financial position among financial assets. See also Note 21 Financial assets.4 In the consolidated statement of financial position, SEK 27,778 M (29,759) was reported as other operating receivables. See Note 24 Other operating receivables. Of this amount, trade accounts
receivable accounted for SEK 20,249 M (23,815). These were reported as financial instruments. The remaining amount is SEK 7,529 M (5,944) and breaks down as SEK 1,064 M (97) for financial instruments and SEK 6,465 M (5,847) for non-financial instruments. The amount reported as financial instruments includes accrued interest income, deposits etc. Amounts reported as non-financial items include, for example, interim items other than accrued interest, VAT receivables, pension-related receivables and other employee-related receivables.
Note 6. Continued
Skanska Annual Report 2017 121Notes including accounting and valuation principles
Reconciliation with statement of financial position Dec 31, 2017 Dec 31, 2016
Assets
Financial instruments 37,258 40,453
Other assets
Property, plant and equipment and intangible assets 12,390 13,141
Investments in joint ventures and associated companies 3,314 4,160
Tax assets 2,945 2,433
Current-asset properties 39,010 33,678
Inventories 1,058 1,042
Gross amount due from customers for contract work 6,997 5,751
Other operating receivables 1 6,465 5,847
Total assets 109,437 106,505
1 In the consolidated statement of financial position, SEK 27,778 M (29,759) was reported as other operating receivables. See Note 24 Other operating receivables. Of this amount, trade accounts receivable accounted for SEK 20,249 M (23,815). These were reported as financial instruments. The remaining amount is SEK 7,529 M (5,944) and breaks down as SEK 1,064 M (97) for financial instruments and SEK 6,465 M (5,847) for non-financial instruments. The amount reported as financial instruments includes accrued interest income, deposits etc. Amounts reported as non-financial items include, for example, interim items other than accrued interest, VAT receivables, pension-related receivables and other employee-related receivables.
LiabilitiesAt fair value
through profit/lossHedge-accounted
derivatives At amortized costTotal carrying
amount
2017
Financial instruments
Interest-bearing liabilities and derivatives
Financial liabilities 1
Financial liabilities at fair value 120 38 158
Financial liabilities at amortized cost 12,161 12,161
120 38 12,161 12,319
Operating liabilities
Trade accounts payable 15,638 15,638
Other operating liabilities 2 496 496
16,134 16,134
Total financial instruments 120 38 28,295 28,453
2016
Financial instruments
Interest-bearing liabilities and derivatives
Financial liabilities 1
Financial liabilities at fair value 96 69 165
Financial liabilities at amortized cost 10,705 10,705
96 69 10,705 10,870
Operating liabilities
Trade accounts payable 15,520 15,520
Other operating liabilities 2 694 694
0 0 16,214 16,214
Total financial instruments 96 69 26,919 27,084
The fair value is SEK 82 M (47) higher than the carrying amount for financial liabilities.
1 The carrying amount for financial liabilities totaling SEK 12,319 M (10,870) is reported in the statement of financial position along with financial liabilities of SEK 11,481 M (10,337) from Note 27 and contingent consideration of SEK 838 M (533) from Note 29. Contingent consideration is included in financial liabilities measured at fair value at SEK 0 M (0) and in financial liabilities measured at amortized cost at SEK 838 M (533). During the year SEK 9 (16) M of the contingent consideration was paid out, and SEK 49 (0) M accrued as interest expense. A further SEK 265 M (0) accrued as contingent consideration.
2 Other financial operating liabilities, totaling SEK 16,134 M (16,214), are reported in the statement of financial position together with trade accounts payable of SEK 15,638 M (15,520) and other financial instruments of SEK 496 M (694). The total item in the statement of financial position amounts to SEK 38,428 M (36,080). See Note 30. Accrued interest expense, checks issued but not cashed, liabilities for unpaid properties etc. are recognized as other financial operating li-abilities. Other non-financial operating liabilities are, for example, interim items other than accrued interest, VAT liabilities, pension-related liabilities and other employee-related liabilities. Operating liabilities are measured at amortized cost.
Note 6. Continued
Skanska Annual Report 2017122 Notes including accounting and valuation principles
Reconciliation with statement of financial position Dec 31, 2017 Dec 31, 2016
Equity and liabilities
Financial instruments 28,453 27,084
Other liabilities
Equity 27,185 27,506
Pensions 5,603 4,901
Tax liabilities 1,547 1,980
Provisions 7,719 6,695
Liabilities to clients for contract work 16,636 18,473
Other operating liabilities 1 22,294 19,866
Total equity and liabilities 109,437 106,505
1 Other financial operating liabilities, totaling SEK 16,134 M (16,214), are reported in the statement of financial position together with trade accounts payable of SEK 15,638 M (15,520) and other financial instruments of SEK 496 M (694). The total item in the statement of financial position amounts to SEK 38,428 M (36,080). See Note 30. Accrued interest expense, checks issued but not cashed, liabilities for unpaid properties etc. are recognized as other financial operating liabilities. Other non-financial operating liabilities are, for example, interim items other than accrued interest, VAT liabilities, pension-related liabilities and other employee-related liabilities. Operating liabilities are measured at amortized cost.
Financial instruments – carrying amount 2017 2016
Assets at fair value 103 179
Assets at amortized cost 37,155 40,274
Total financial assets 37,258 40,453
Liabilities at fair value 158 165
Liabilities at amortized cost 28,295 26,919
Total financial liabilities 28 453 27 084
Financial instruments are measured at fair value or amortized cost in the balance
sheet depending on classification. Financial instruments measured at fair value in
the balance sheet belong to level two of the hierarchy in IFRS 13. The difference
between fair value and carrying amount is marginal.
Disclosures on offsetting of financial instruments 2017 2016
Financial assets Financial liabilities Financial assets Financial liabilities
Gross amounts 37,258 28,453 40,453 27,084
Amounts offset 0 0 0 0
Recognized in balance sheet 37,258 28,453 40,453 27,084
Amounts covered by netting arrangements –53 –53 –61 –61
Net amount after netting arrangements 37,205 28,400 40,392 27,023
Note 6. Continued
Skanska Annual Report 2017 123Notes including accounting and valuation principles
Financial assets and liabilities measured at fair value through profit or lossFinancial assets and liabilities at fair value through profit or loss belong to the
category that has been identified as such on the first recognition date or consist of
derivatives. The amounts for 2017 and 2016 are attributable to derivatives.
Hedge-accounted derivativesDerivatives belong to the category “Financial assets and liabilities at fair value
through profit or loss.” Skanska separately reports hedge-accounted derivatives.
The amounts for 2017 and 2016 are related to currency forward contracts for
hedging of net investments outside Sweden, as well as interest rate swaps for
loan hedges with variable interest rates.
Fair value relating to hedged transaction exposure is reported under “Gross
amount due to/from customers for contract work” or according to construction
contracts under “Other operating receivables/liabilities.”
Fair valueThere are three different levels for establishing fair value. The first level uses the
official price quotation in an active market. The second level, which is used when
a price quotation in an active market does not exist, calculates fair value by re-
measuring at observable exchange rates and discounting future cash flows based
on observable market interest rates for each respective maturity and currency.
The third level uses substantial elements of input data that are not observable in
the market.
Fair values for the categories “At fair value through profit or loss” and “Hedge-
accounted derivatives” have been set according to the second level above. In
calculating fair value in the borrowing portfolio, Skanska takes into account
current market interest rates, which include the credit risk premium that Skanska
is estimated to pay for its borrowing. In total, assets amounting to SEK 103 M
(179) and liabilities amounting to SEK 158 M (165) have been measured according
to this level.
The fair value of financial instruments with option elements is calculated using
the Black-Scholes model. As of December 31, 2017, Skanska had no instruments
with option elements.
The fair value of liabilities for contingent considerations is measured according
to level three. All other financial assets and liabilities are measured according to
level two.
Impact of financial instruments on the consolidated income statement, other comprehensive income and equity
Revenue and expenses from financial instruments recognized in the income statement 2017 2016
Recognized in operating income
Interest income on loan receivables 6
Interest expense on financial liabilities at cost –1 –3
Cash flow hedges removed from equity and recognized in the income statement 226 1,851
Total income and expenses in operating income 225 1,854
Note 6.Continued
Skanska Annual Report 2017124 Notes including accounting and valuation principles
Recognized in financial items
Interest income on held-to-maturity investments 10 2
Interest income on loan receivables 24 39
Interest income on cash and bank balances 55 30
Dividends 33 43
Changes in market value of financial assets measured at fair value through profit or loss 1 5
Changes in market value of financial liabilities measured at fair value through profit or loss 25
Total income in financial items 148 119
Interest expense on financial liabilities measured at fair value through profit or loss –47 –84
Interest expense on financial liabilities measured at amortized cost –219 –161
Changes in market value of financial liabilities measured at fair value through profit or loss –2 –3
Net exchange rate differences 23 –24
Expenses for borrowing programs –15 –17
Bank-related expenses and other 2 –24
Total expenses in financial items –258 –313
Net income and expenses from financial instruments recognized in the income statement 115 1,660
of which interest income on financial assets not measured at fair value through profit or loss 89 77
of which interest expense on financial liabilities not measured at fair value through profit or loss –220 –164
Reconciliation with financial items 2017 2016
Total income from financial instruments in financial items 148 119
Total expense from financial instruments in financial items –258 –313
Net interest income on pensions –102 –101
Other interest expense 257 176
Total financial items 45 –119
See also Note 14 Financial items.
Income and expenses from financial instruments recognized under other comprehensive income 2017 2016
Cash flow hedges recognized directly in equity –5 –965
Cash flow hedges removed from equity and recognized in the income statement 226 1,851
Translation differences –599 1,165
Hedging on foreign exchange rate risk in operations outside Sweden –125 36
Total –503 2,087
of which recognized in cash flow hedge reserve 221 886
of which recognized in translation reserve –724 1,201
–503 2,087
CollateralThe Group has provided collateral (assets pledged) in the form of financial receiv-
ables amounting to SEK 940 M (1,021). Also see Note 33 Assets pledged, contin-
gent liabilities and contingent assets. These assets may be utilized by customers
if Skanska does not fulfill its obligations according to the respective construction
contract. To a varying extent, the Group has obtained collateral for trade accounts
receivable in the form of guarantees issued by banks and insurance companies
and, in some cases, in the form of guarantees from the parent companies of
customers.
Note 6. Continued
Skanska Annual Report 2017 125Notes including accounting and valuation principles
Note 7. Business combinations
Business combinations (acquisitions of businesses) are reported in compliance
with IFRS 3 Business Combinations. See Note 1 Accounting and valuation prin-
ciples.
Acquisitions of Group companies/operationsNo acquisitions were made in 2017 or 2016.
Note 8. Revenue
Projects within Skanska’s contracting operations are reported in compliance with
IAS 11 Construction Contracts. See Note 9.
Revenue other than project revenue is recognized in compliance with IAS 18
Revenue. See Note 1 Accounting and valuation principles.
Revenue by business stream
2017 2016
Construction 150,050 138,001
Residential Development 11,823 7,571
Commercial Property Development 9,516 9,711
Infrastructure Development 81 237
Other
Central 1,364 1,437
Eliminations, see below –14,957 –11,592
Total 157,877 145,365
Reported as eliminations
2017 2016
Intra-Group construction for
Construction –317 –516
Residential Development –5,817 –4,678
Commercial Property Development –7,603 –5,426
Infrastructure Development 1
Intra-Group property divestments –179 –9
Other –1,041 –963
–14 957 –11 592
1 Construction includes SEK 9,405 M (7,220) in intra-Group construction for Infrastructure De-velopment. Elimination does not occur since this revenue consists of invoices issued to joint ventures, which are recognized according to the equity method of accounting.
Revenue by category
2017 2016
Construction contracts 131,510 123,095
Services 3,043 3,066
Sales of goods 2,296 2,061
Rental income 551 594
Property divestments 20,477 16,549
Total 157,877 145,365
As for other types of revenue, dividends and interest income are recognized in
financial items. See Note 14 Financial items.
Other mattersInvoices issued to associated companies and joint ventures amounted to
SEK 9,454 M (7,310). For other related party transactions, see Note 39 Related
party disclosures.
Note 9. Construction contracts
Construction contracts are recognized as revenue as projects progress to
completion. See Note 1 Accounting and valuation principles.
For risks in ongoing assignments, see Note 2 Key estimates and judgements,
and the Report of the Directors.
Information from the income statementRevenue recognized during the year amounted to SEK 131,510 M (123,095).
Information from the statement of financial position
Gross amount due from customers for contract work Dec 31, 2017 Dec 31, 2016
Accrued revenue 152,713 184,109
Invoiced revenue –145,716 –178,358
Total assets 6,997 5,751
Gross amount to customers for contract work Dec 31, 2017 Dec 31, 2016
Invoiced revenue 327,530 301,316
Accrued revenue –310,894 –282,843
Total liabilities 16,636 18,473
Accrued revenue in ongoing projects including recognized gains minus recognized
loss provisions amounted to SEK 463,607 M (466,952).
Advance payments received totaled SEK 2,150 M (1,771).
Amounts retained by clients, which have been partly invoiced according to an
established plan and which the client is retaining in accordance with contractual
terms until all the conditions specified in the contract are met, amounted to
SEK 3,682 M (4,404).
Skanska Annual Report 2017126 Notes including accounting and valuation principles
Note 10. Operating expenses by category of expense
In 2017, revenue increased by SEK 12,512 M to SEK 157,877 M (145,365). Operat-
ing income decreased by SEK 2,642 M, to SEK 4,578 M (7,220). Personnel expenses
for the year amounted to SEK –27,933 M (–27,879).
Other operating expenses adjusted for current-asset properties divested and
income in joint ventures and associated companies amounted to SEK –109,283 M
(–98,652).
2017 2016
Revenue 157,877 145,365
Personnel expenses 1 –27,933 –27,879
Depreciation/amortization –1,587 –1,439
Impairment losses –875 –534
Carrying amount of current-asset properties divested –15,276 –11,767
Income from joint ventures and associated companies 1,655 2,126
Other 2 –109,283 –98,652
Total expenses –153,299 –138,145
Operating income 4,578 7,220
1 Personnel expenses include salaries and other remuneration of SEK 22,022 M (21,778), social insurance contributions of SEK 5,415 M (5,531) recognized according to Note 36 Personnel, as well as non-monetary remuneration such as company car benefits and shares received under Seop amounting to SEK 516 M (570).
2 Other includes purchased materials, machinery rentals and subcontractors.
Depreciation/amortization by asset class and business stream
ConstructionResidential
DevelopmentCommercial Property
DevelopmentInfrastructure Development
Central and eliminations Total
2017
Intangible assets –103 –73 –176
Property, plant and equipment
Property (buildings and land) –88 –1 –89
Plant and equipment –1,287 –1 –6 –3 –25 –1,322
Total –1,478 –1 –6 –3 –99 –1,587
2016
Intangible assets –77 –56 –133
Property, plant and equipment
Property (buildings and land) –77 –1 –78
Plant and equipment –1,194 –1 –3 –4 –26 –1,228
Total –1,348 –1 –3 –4 –83 –1,439
Note 12. Depreciation/amortization
Depreciation and amortization are carried out in compliance with IAS 16 Property,
Plant and Equipment, and IAS 38 Intangible Assets. See Note 1 Accounting and
valuation principles.
Depreciation and amortization are presented below by business stream.
For further information on depreciation and amortization, see Note 17 Property,
plant and equipment, and Note 19 Intangible assets.
Note 11. Selling and administrative expenses
Selling and administrative expenses are recognized as one item. See Note 1 Ac-
counting and valuation principles.
Selling and administrative expenses 2017 2016
Construction –7,132 –6,567
Residential Development –666 –559
Commercial Property Development –899 –751
Infrastructure Development –121 –147
Central expenses 1 –1,033 –1,128
Total –9,851 –9,152
1 Including eliminations.
Skanska Annual Report 2017 127Notes including accounting and valuation principles
Note 13. Impairment losses/reversals of impairment losses
Impairment losses are recognized in compliance with IAS 36 Impairment of As-
sets. See Note 1 Accounting and valuation principles.
Impairment losses on current-asset properties are recognized in compliance
with IAS 2 Inventories.
Impairment losses/reversals of impairment losses are presented below by busi-
ness stream.
For further information on impairment losses/reversals of impairment losses, see
Note 17 Property, plant and equipment, Note 18 Goodwill, Note 19 Intangible
assets and Note 22 Current-asset properties/Project development.
Impairment losses/reversals of impairment losses by asset class and business stream
ConstructionResidential
Development
Commercial Property
DevelopmentInfrastructure Development
Central and eliminations Total
2017
Recognized in operating income
Intangible assets
Goodwill –592 –592
Other intangible assets –129 –129
Property, plant and equipment Property (buildings and land) –106 –106
Plant and equipment –12 –12
Investments in joint ventures and associated com-panies –2 –6 –11 –19
Current-asset properties Commercial Property Development –16 13 –3
Residential Development –14 –14
Total –857 –14 –6 –11 13 –875
2016
Recognized in operating income
Property, plant and equipment
Property (buildings and land) 8 8
Plant and equipment
Investments in joint ventures and associated compa-nies –331 –331
Current-asset properties Commercial Property Development –198 29 –169
Residential Development –42 –42
Total 8 –42 –198 –331 29 –534
Skanska Annual Report 2017128 Notes including accounting and valuation principles
Note 14. Financial items
2017 2016
Financial income
Interest income 89 71
Income from sale of shares 2 12
Dividends 31 31
Change in market value 25 5
Net exchange rate differences 23 –
170 119
Financial expense
Interest expense –266 –245
Net interest income on pensions –102 –101
Capitalized interest expense 257 176
Change in market value –1 –3
Net exchange rate differences – –24
Other financial items –13 –41
–125 –238
Total 45 –119
Disclosures on the portion of income and expenses in financial items that comes
from financial instruments are presented in Note 6 Financial instruments and
financial risk management.
Net interest itemsFinancial items amounted to SEK 45 M (–119). Net interest items improved to
SEK –22 M (–99).
Interest income increased to SEK 89 M (71), mainly due to higher market interest
rates in the US market. Interest expense before capitalized interest decreased to
SEK –266 M (–245), which is attributable to an increase in the volume of construc-
tion loans in Sweden. During the year, Skanska capitalized interest expense of
SEK 257 M (176) in ongoing projects for its own account.
Interest income was received at an average interest rate of 0.63 percent (0.49).
Interest expense, excluding interest on pension liabilities, was paid at an average
interest rate of 1.26 percent (1.21) during the year. Taking into account derivatives,
the average interest rate was 1.60 percent (2.04).
Net interest on pensions, which refers to the estimated net amount of interest
expense related to defined–benefit pension obligations and return on pension
plan assets at the beginning of the year, based on the outcome in 2017, increased
to SEK –102 M (–101). See also Note 28 Pensions.
The Group had net interest items of SEK –1 M (3) that were recognized in oper-
ating income. See Note 1 Accounting and valuation principles.
Change in market valueThe change in market value amounted to SEK 24 M (2) and the increase is mainly
due to a positive change in the market value of interest rate swap contracts.
Other financial itemsOther financial items totaled SEK –13 M (–41) and mainly related to various fees
for credit facilities and bank guarantees.
Note 15. Borrowing costs
Borrowing costs related to investments that require a substantial period for
completion are capitalized. See Note 1 Accounting and valuation principles.
In 2017, borrowing costs were capitalized at an interest rate of around
1.7 percent (1.5).
Capitalized interest during the year
Total accumulated capitalized interest included in
2017 2016 2017 2016
Current-asset properties 257 176 366 245
Total 257 176 366 245
Note 16. Income taxes
Income taxes are reported in compliance with IAS 12 Income Taxes. See Note 1
Accounting and valuation principles.
Tax expense
2017 2016
Current taxes –519 –969
Deferred tax expenses from change in temporary differences –43 –385
Deferred tax income from change in loss carryforwards 68 82
Taxes in joint ventures –17 –94
Taxes in associated companies –1
Total –512 –1 366
Tax items recognized under other comprehensive income
2017 2016
Deferred taxes attributable to cash flow hedges –25 –4
Deferred taxes attributable to pensions 69 189
Total 44 185
There was no deferred tax attributable to the category “available-for-sale finan-
cial assets.”
Relationship between taxes calculated after aggregating nominal tax rates and recognized taxesThe Group’s recognized tax rate amounted to 11 percent (19).
The Group’s aggregated nominal tax rate was estimated at 20 percent (26).
The average nominal tax rate in Skanska’s home markets in Europe amounted to
about 21 percent (21), and in USA, just over 40 percent (40), depending on the alloca-
tion of income between the different states.
The relationship between taxes calculated after aggregating nominal tax rates of
20 percent (26) and recognized taxes of 11 percent (19) is explained in the following
table.
Skanska Annual Report 2017 129Notes including accounting and valuation principles
2017 2016
Income after financial items 4,623 7,101
Tax according to aggregation of nominal tax rates, 20 (26) percent –925 –1,846
Tax effect of:Property divestments 1 663 366
Divestment of infrastructure projects 2 219 269
Losses in Poland 3 –190
Change in US tax rate 4 –121
Other –158 –155
Recognized tax expense –512 –1,366
1 In a number of the markets where Skanska operates, the sale of real estate projects via the divestment of companies is tax-free.
2 In a number of the markets where Skanska operates, the sale of infrastructure projects via the divestment of companies is tax-free.
3 The possibility of utilizing loss carryforwards in Poland is limited, as regards both amounts and time. Since it is uncertain whether Skanska will be able to utilize the losses within the construction operations in Poland, SEK 190 M has been charged to tax expense for the year.
4 The federal tax rate in USA was reduced from 35 percent to 21 percent at the end of 2017. Deferred tax assets exceed deferred tax liabilities for Skanska in USA. The net effect of the adjusted carrying amount for deferred tax assets and deferred tax liabilities resulting from the reduced federal tax rate in USA has been charged to tax expense for the year in the amount of SEK 121 M.
Income taxes paid in 2017 amounted to SEK –968 M (–1,205).
Income taxes paid can vary greatly from year to year for the countries where
the Group operates.
Income taxes are often calculated based on different principles to those that
apply to the preparation of the consolidated income statement. If the final income
tax is less than the amount provisionally withdrawn in previous years, income
taxes paid for the year may be substantially reduced.
The table below shows a breakdown by country of income taxes paid:
Land 2017 Land 2016
Sweden 736 Sweden 630
Norway 140 USA 292
Finland 57 Norway 79
Czech Republic 27 Finland 59
UK 24 Czech Republic 52
Other –16 Other 93
968 1,205
Tax assets and tax liabilities
Dec 31, 2017 Dec 31, 2016
Tax assets 1,188 784
Tax liabilities 312 489
Net tax assets (+), tax liabilities (–) 876 295
Tax assets and tax liabilities refer to the difference between estimated income
tax for the year and preliminary tax paid, as well as income taxes for prior years
that have not yet been paid.
Deferred tax assets and deferred tax liabilities
Dec 31, 2017 Dec 31, 2016
Deferred tax assets according to the statement of financial position 1,757 1,649
Deferred tax liabilities according to the statement of financial position 1,235 1,491
Net deferred tax assets (+), deferred tax liabilities (–) 522 158
Dec 31, 2017 Dec 31, 2016
Deferred tax assets for loss carryforwards 237 167
Deferred tax assets for other assets 271 272
Deferred tax assets for provisions for pensions 1,297 1,140
Deferred tax assets for ongoing projects 713 647
Other deferred tax assets 1,253 1,633
Total before net accounting 3,771 3,859
Net accounting of offsettable deferred tax assets/liabilities –2,014 –2,210
Deferred tax assets according to the statement of financial position 1,757 1,649
Deferred tax liabilities for non-current assets 207 432
Deferred tax liabilities for ongoing projects 1,769 1,596
Deferred tax liabilities for other current assets 200 202
Other deferred tax liabilities 1,073 1,471
Total before net accounting 3,249 3,701
Net accounting of offsettable deferred tax assets/liabilities –2,014 –2,210
Deferred tax liabilities according to the statement of financial position 1,235 1,491
Change in net deferred tax assets (+), liabilities (–)
2017 2016
Net deferred tax assets, January 1 158 98
Divestments of companies 221
Recognized under other comprehensive income 44 185
Deferred tax income/expenses 25 -303
Reclassifications 290 -19
Exchange rate differences 5 -24
Net deferred tax assets, December 31 522 158
Deferred tax assets other than for loss carryforwards refer to temporary differences
between carrying amounts for tax purposes and carrying amounts recognized in
the statement of financial position. These differences arise, for example, when
the Group’s valuation principles diverge from those applied locally by a Group
company. These deferred tax assets are mostly expected to be realized within
five years.
Note 16. Continued
Skanska Annual Report 2017130 Notes including accounting and valuation principles
Deferred tax assets arise, for example, when a recognized depreciation/amortiza-
tion/impairment loss on assets becomes tax-deductible only in a later period,
when eliminating intra-Group profits, when the provisions for defined-benefit
pensions differ between local rules and IAS 19, when the required provisions
become tax-deductible in a later period and when advance payments for ongoing
projects are taxed on a cash basis.
Deferred tax liabilities for other assets and other deferred tax liabilities refer
to temporary differences between carrying amounts for tax purposes and car-
rying amounts in the statement of financial position. These differences arise, for
example, when the Group’s valuation principles deviate from those applied locally
by a Group company. These deferred tax liabilities are expected to be mostly real-
ized within five years.
For example, deferred tax liabilities arise when depreciation/amortization for
tax purposes in the current period is larger than the required economic deprecia-
tion/amortization and when accrued profits in ongoing projects are taxed only
when the project is completed.
Temporary differences attributable to investments in Group companies,
branches, associated companies and joint ventures for which deferred tax
liabilities were not recognized amount to SEK 0 M (0). In Sweden and a number
of other countries, divestments of holdings in limited companies are tax-exempt
under certain circumstances. Temporary differences thus do not normally exist
for shareholdings of the Group’s companies in these countries.
Deferred tax liabilities for future dividends from subsidiaries amount to 0 (0)
because dividends from subsidiaries in the markets where Skanska is currently
active do not have any consequences with respect to taxes.
Temporary differences and loss carryforwards that are not recognized as deferred tax assets
Dec 31, 2017 Dec 31, 2016
Loss carryforwards that expire within one year 1
Loss carryforwards that expire in more than one year but within three years 523 13
Loss carryforwards that expire in more than three years 2,241 1,799
Total 2,765 1,812
Skanska has loss carryforwards in a number of countries. In some of these coun-
tries the likelihood that a loss carryforward will be able to be used is difficult to
assess, and therefore no deferred tax asset is reported.
Note 16.Continued
Skanska Annual Report 2017 131Notes including accounting and valuation principles
Note 17. Property, plant and equipment
Property, plant and equipment are reported in compliance with IAS 16 Property,
Plant and Equipment. See Note 1 Accounting and valuation principles.
Office buildings and other buildings used in the Group’s operations are
recognized as property, plant and equipment. Machinery and equipment are
recognized as a single item (“Plant and equipment”).
Property, plant and equipment by asset class
2017 2016
Property (buildings and land) 1,610 1,855
Plant and equipment 5,126 4,865
Property, plant and equipment under construction 138 117
Total 6,874 6,837
Depreciation of property, plant and equipment by asset class and function
Cost of salesSelling and
administration Total
2017 2016 2017 2016 2017 2016
Property (buildings and land) –57 –54 –32 –24 –89 –78
Plant and equipment –1,176 –1,077 –146 –151 –1,322 –1,228
Total –1,233 –1,131 –178 –175 –1,411 –1,306
Impairment losses/reversals of impairment losses on property, plant and equipmentIn 2017, gross reversals of impairment losses in the amount of SEK 0 M (8) were
recognized. Impairment losses during the year and reversals of the impairment
losses in the comparative year were recognized in Poland. All impairment losses/
reversals of impairment losses were recognized as production and management
costs.
Property (build-ings and land)
Plant and equipment Total
Impairment losses/reversals of impairment losses 2017 2016 2017 2016 2017 2016
Impairment losses –106 –12 –118 0
Reversals of impairment losses 8 0 8
Total –106 8 –12 0 –118 8
Amount of impairment losses/reversals of impair-ment losses based on 2017 2016 2017 2016 2017 2016
Fair value less selling ex-penses/costs of disposal –106 –12 –118 0
Value in use 8 0 8
Total –106 8 –12 0 –118 8
Information about cost, accumulated depreciation and accumulated impairment losses
Property (buildings and land) Plant and equipmentProperty, plant and equipment
under construction
2017 2016 2017 2016 2017 2016
Accumulated depreciation according to planJanuary 1 3,597 3,490 21,472 21,022 117 85
Investments 27 42 1,764 1,472 85 122
Acquisitions of companies
Divestments –51 –74 –97 –755 –11 –36
Reclassifications 43 29 323 37 –58 –56
Exchange rate differences for the year 17 110 –254 –304 5 2
3,633 3,597 23,208 21,472 138 117
Accumulated depreciation according to planJanuary 1 –1,458 –1,369 –16,424 –16,260
Divestments and disposals 0 18 55 550
Reclassifications –59 –260
Amortization of the year –89 –78 –1,322 –1,228
Exchange rate differences for the year –26 –29 63 514
–1,632 –1,458 –17,888 –16,424
Accumulated impairment losses
January 1 –284 –284 –183 –180
Divestments 12 –1 0
Reclassifications 0 0
Impairment losses/reversals of impairment losses for the year –106 8 –12
Exchange rate differences for the year –13 –7 1 –3
–391 –284 –194 –183
Carrying amount, December 31 1,610 1,855 5,126 4,865 138 117
Carrying amount, January 1 1,855 1,837 4,865 4,582 117 85
Other itemsInformation about capitalized interest is presented in Note 15 Borrowing costs.
For information on finance leases, see Note 40 Leases.
Skanska has obligations to acquire property, plant and equipment in the amount
of SEK 0 M (0). Skanska did not receive any significant compensation from third
parties for property, plant and equipment that was damaged or lost during the
year or in the comparative year.
Skanska Annual Report 2017132 Notes including accounting and valuation principles
Note 18.Goodwill
Goodwill is recognized in compliance with IFRS 3 Business Combinations.
See Note 1 Accounting and valuation principles. For key judgements, see Note 2.
Goodwill amounted to SEK 4,554 M (5,270). In 2017 goodwill decreased by
SEK 716 M net due to exchange rate differences and impairment losses
During the comparative year, goodwill increased by SEK 14 M.
Goodwill amounts by cash-generating units
2017 2016Change during
the yearOf which
impairment lossesOf which exchange
rate differences
Construction
Sweden 49 49 0 0
Norway 947 996 –49 –49
Finland 431 419 12 12
Poland 0 46 –46 –48 2
Czech Republic/Slovakia 519 535 –16 –59 43
UK 1,468 1,578 –110 –100 –10
USA Building 333 368 –35 –35
USA Civil 400 850 –450 –385 –65
Residential DevelopmentNorway 397 419 –22 –22
Finland 10 10 0 0
Total 4,554 5,270 –716 –592 –124
The goodwill recoverable amount is based exclusively on value in use. The
amounts of goodwill together with other non-current assets, current-asset prop-
erties and net working capital are tested annually.
Expected cash flows are based on forecasts for the development of the con-
struction investments and residential development in each market in the countries
where the Group has operations.
The forecasts are based on the units’ two-year forecasts and the established
five-year business plan. Future macroeconomic development and changes in
interest rates are also important variables.
The forecast period is 10 years, which is the period used in models for measure-
ment of other types of assets, for example commercial projects.
Using 10-year models it is easier to make assumptions concerning cycles, and
there is less reliance on residual values.
The growth rate used to extrapolate cash flow forecasts beyond the period
covered by the 10-year forecasts is the normal growth rate for the industry in each
respective country.
Each Business Unit uses a unique discount factor based on the weighted average
cost of capital (WACC).
Parameters that affect the WACC are interest rates for borrowing, market risks
and the ratio between borrowed funds and equity. The WACC interest rate is
stated both before and after taxes.
The following table shows how the carrying amount relates to the recoverable
amount for the respective Business Units for Skanska’s largest goodwill items. The
recoverable amount is expressed as 100. The tests are based on an assessment of
development over the next 10-year period.
Norway FinlandCzech
Republic UKUSA Civil
Recoverable amount, 100 100 100 100 100 100
Carrying amount 1 49 21 24 7 n.a
Carrying amount, previous year 40 21 8 5 n.a
Interest rate, percent (WACC), before taxes 10 8 7 8 9
Interest rate, percent (WACC), after taxes 8 7 7 7 8
Expected growth, % 2 2 3 2 3
Interest rate, percent (WACC), previous year (before taxes) 12 8 9 10 10
Interest rate, percent (WACC), previous year (after taxes) 8 7 8 9 7
Expected growth, %, previous year 2 2 3 3 2
Carrying amount in relation to recoverable amount, 100 in case of increase in interest rate by
+ 1 percentage point 61 26 29 8 n.a
+ 5 percentage points 122 52 49 14 n.a
Carrying amount, previous year, in relation to recoverable amount 100 in case of increase in interest rate by
+ 1 percentage point 48 26 9 6 n.a
+ 5 percentage points 81 49 15 8 n.a
1 Value > 100 indicates that the recoverable amount is less than the carrying amount and an impairment loss needs to be recognized. For Skanska’s operations in USA, the carrying amount was negative due to negative working capital exceeding the value of non-current assets.
Goodwill impairment lossesChanged market conditions for the operations in Poland, Czech Republic, the UK
and in USA Civil have resulted in decisions on restructuring and impairment of
goodwill in the amount of SEK 592 million (0).
Skanska Annual Report 2017 133Notes including accounting and valuation principles
Note 19. Intangible assets
Intangible assets are recognized in compliance with IAS 38 Intangible Assets. See
Note 1 Accounting and valuation principles.
Intangible assets and useful life applied
Dec 31, 2017
Dec 31, 2016
Useful life applied
Intangible assets, internally generated 438 567 3–10 years
Intangible assets, externally acquired 524 467 3–7 years
Total 962 1,034
Internally generated intangible assets consist of business systems. Externally
acquired intangible assets include acquired software in USA and Finland, and
licenses in Sweden.
Business systems are amortized over a maximum of seven years. Service
contracts are amortized over a period of three to six years, customer contracts are
amortized at the pace of completion and patents are amortized over 10 years.
Amortization of other intangible assets by functionAll intangible assets are amortized as they have a limited useful life.
Amortization by function 2017 2016
Cost of sales –58 –53
Selling and administration –118 –80
Total –176 –133
Impairment losses/reversals of impairment losses on other intangible assetsIn 2017 impairment losses in the amount of SEK 129 M (0) were recognized.
Impairment losses were applied in Poland during the year.
Information about cost, accumulated depreciation and accumulated impairment losses
Intangible assets, externally acquired
Intangible assets, internally generated 1
2017 2016 2017 2016
Accumulated cost
January 1 1,594 1,407 552 391
Other investments 131 232 124 162
Divestments –30 –1
Reclassifications –99 –78 7 0
Exchange rate differences for the year –19 34 0 –1
1,577 1,594 683 552
Accumulated amortization
January 1 –977 –948 –85 –42
Divestments 29
Amortization for the year –108 –89 –68 –44
Reclassifications 97 78 –4
Exchange rate differences for the year 6 –18 –2 1
–953 –977 –159 –85
Accumulated impairment losses
January 1 –50 –54 0 0
Impairment losses for the year –129
Exchange rate differences for the year –7 4
–186 –50 0 0
Carrying amount, December 31 438 567 524 467
Carrying amount, January 1 567 405 467 349
1 Internally generated intangible assets consist of business systems.
Other itemsInformation about capitalized interest is presented in Note 15 Borrowing costs.
Direct research and development expenses amounted to SEK 253 M (231).
Skanska Annual Report 2017134 Notes including accounting and valuation principles
Note 20 A. Subsidiaries
The Parent Company Skanska AB holds 100 percent of the shares in Skanska
Financial Services AB and Skanska Kraft AB. Skanska Kraft AB in turn directly or
indirectly owns the subsidiaries in the countries in which Skanska has operations.
All subsidiaries are independent limited companies, partnerships or equivalent legal
forms in each country. Regarding the companies’ domicile, see the Parent Company
notes, Note 52 Holdings in Group companies.
According to Note 26, there are only minor interests in non-controlling interests.
Skanska AB
Construction
Sweden
Czech Republic and Slovakia
Norway
UK
Finland
USA Building
Poland
USA Civil
Skanska Financial Services
Infrastructure Development
Residential Development
Sweden
Czech Republic
Norway
Finland
Poland
Sweden
Czech Republic
Norway
Finland
Hungary
Denmark
Romania
Poland
UK
USA
Commercial Property Development
Skanska Kraft AB
Skanska’s Company Structure
Central
Skanska Annual Report 2017 135Notes including accounting and valuation principles
Note 20 B. Investments in joint ventures and associated companies
For all joint arrangements an assessment is made of their legal form, agreements
between the owning parties and other circumstances. In compliance with IFRS
11, the joint arrangement is reported as a joint venture if the owning parties only
have rights to the net assets. See also Note 1.
Investments in joint ventures and associated companies are reported according
to the equity method of accounting. Income from joint ventures and associ-
ated companies is reported on a separate line in operating income. This income
consists of the Group’s share of the income in joint ventures and associated com-
panies after financial items, adjusted for any impairment losses on consolidated
goodwill and intra-Group profits.
Income from joint ventures and associated companies is presented in the
following table.
2017 2016
Share of income in joint ventures according to the equity method 1 386 724
Share of income in associated companies accord-ing to the equity method 1 2 4
Divestments of joint ventures 1,286 1,729
Impairment losses in joint ventures –19 –331
Total 1,655 2,126
1 When calculating the income of joint ventures and associated companies according to the equity method, the Group’s share of taxes is recognized on the “Taxes” line in the income statement. The Group’s share of taxes in joint ventures amounts to SEK –17 M (–94) and its share of associated companies’ taxes amounts to SEK –1 M (0). See also Note 16 Income taxes.
The carrying amount according to the statement of financial position and the
change that occurred can be seen in the following table.
2017 2016
Jointventures
Associated-companies Total
Jointventures
Associated-companies Total
January 1 4,137 23 4,160 2,833 19 2,852
New acquisitions 603 603 1,661 1,661
Divestments –1,019 –1,019 –1,328 –1,328
Reclassifications –376 –376 40 40
Exchange rate differences for the year –223 –1 –224 146 1 147
The year’s provision/reversal for intra-Group profit on contracting work –9 –9 –11 –11
Changes in fair value of derivatives 83 83 855 855
Impairment losses for the year –19 –19 –331 –331
The year’s change in share of income in joint ventures and associated companies after subtracting dividends received 114 1 115 272 3 275
Carrying amount, December 31 3,291 23 3,314 4,137 23 4,160
Joint venturesJoint ventures are reported in compliance with IFRS 11 Interests in joint ventures.
See Note 1 Accounting and valuation principles.
The Group has holdings in joint ventures with a carrying amount of
SEK 3,291 M (4,137).
Infrastructure Development includes carrying amounts in joint ventures
totaling SEK 1,944 M (2,701).
Income from joint venturesThe share of income in joint ventures, excluding tax expense, is reported in oper-
ating income, because these holdings are an element of Skanska’s business.
The share of income in joint ventures according to the equity method comes
mainly from Infrastructure Development operations.
Skanska Annual Report 2017136 Notes including accounting and valuation principles
Note 20 B. Continued
Infrastructure DevelopmentInfrastructure Development specializes in identifying, developing and investing
in privately financed infrastructure projects, such as roads, hospitals and airports.
The business stream focuses on creating new potential projects, mainly in the
markets where the Group has operations. This business stream is focused on cre-
ating new project opportunities, mainly in the markets where the Group already
has operations. Public-private partnerships (PPP) are a type of public procurement
where a project company,owned by a private company, has overall responsibility
for developing, financing, building, operating and maintaining public facilities.
Specification of major holdings of shares and participations in joint ventures
Company Type Country
Percentage of share
capital
Percentage of voting
power
Consolidated carrying amount 1
Dec 31, 2017 Dec 31, 2016
Joint ventures in Infrastructure Development 1
Bristol LEP Ltd 3 Education UK 80 80 6 6
Elizabeth River Crossings LLC Highway/tunnel USA 50 50 0 0
Elizabeth River Crossings Holdco LLC Highway/tunnel USA 50 50 1,236 1,703
Essex LEP Ltd 3 Education UK 70 70 12 13
Gdansk Transport Company S.A 4 Highway Poland 30 30 – 401
I-4 Mobility Partners Holdco LLC Highway USA 50 50 0 11
Mullbergs Vindpark AB 4 Wind power Sweden 50 50 – 0
NPH Healthcare (Holdings) Limited shares Healthcare UK 50 50 0 0
Sjisjka Vind AB 4 Wind power Sweden 67 67 – 138
Swedish Hospital Partners Holding AB Healthcare Sweden 50 50 677 427
LaGuardia Gateway Partners LLC Airport USA 32 32 13 2
Total joint ventures in Infrastructure Development 1,944 2,701
AB Sydsten Construction Sweden 50 50 112 102
Alley 111 Owner LLC 4 Commercial Property Development USA 20 20 – 62
SKPR 1350 Boylston LP Commercial Property Development USA 50 50 210 234
SKPR Watermark Seaport Operating Company LLC Commercial Property Development USA 50 50 184 193
Sundtkvartalet Holding AS 3 Commercial Property Development Norway 50 50 – 94
T-C/SK 400 Fairview Holding LLC Commercial Property Development USA 10 10 122 133
Tiedemannsbyen DA Residential Development Norway 50 50 79 104
Botkyrka Södra Porten Holding AB Construction Sweden 50 50 102 103
Nacka 13:79 JV AB Residential Development Sweden 50 50 98 93
Sjöstadsbo AB Residential Development Sweden 50 50 131 142
Järvastaden AB Residential Development Sweden 50 50 119 0
Other joint ventures 190 176
Total joint ventures, Group 3,291 4,137
1 Consolidated carrying amounts represent the Group’s share of the equity including results achieved, Group adjustments and deductions for dividends provided. 2 Carrying amounts for joint ventures in Infrastructure Development are affected by cash flow hedges. The value of these cash flow hedges amounts to SEK –552 M (–640). When joint ventures
where the carrying amount is affected by cash flow hedges are sold, the income from the sale will be affected as the effect of the cash flow hedges is rebooked against income.3 For the companies Bristol LEP Ltd and Essex LEP Ltd shareholder agreements exist between the co-owners stating, among other things, that key issues such as budgets and investments must be
determined jointly; Skanska has concluded that this means Skanska does not have a controlling interest, despite having a high percentage of the capital and voting rights.4 Holding divested in 2017.
Unrealized development gain in Infrastructure Development
SEK bn Dec 31, 2017 Dec 31, 2016
Present value of cash flow from projects 3.8 5.2
Present value of remaining investments –0.8 –0.9
Present value of projects 3.0 4.3
Carrying amount before cash flow hedging –2.5 –2.9
Unrealized development gain 0.5 1.4
Cash flow hedges 0.6 0.6
Effect on unrealized equity 1 1.1 2.0
1 Tax effects not included.
The type of payment for the investments may either be based on market risk, for
example road fees, or based on accessibility. The concession periods for current
investments vary between 30 and 58 years and the portions owned in the current
portfolio are between 23 and 80 percent. At this time Infrastructure Development
has investments in Sweden, the UK and USA.
Skanska Annual Report 2017 137Notes including accounting and valuation principles
Income statement
I4 UltimateConnect Plus Holdings Ltd
Elizabeth River
Crossings Holdings
LLC
Gdansk Transport Company
S.A.
NPH Healthcare (Holdings)
Limited shares/
Paworth Hospital
Swedish Hospital Partners
Holdings AB LaGuardia
AirportOther joint
ventures
All joint ventures,
total
2017 2017 2017 2017 2017 2017 2017 2017 2017
Revenue 3,567 675 213 1,411 5,841 1,925 13,632
Depreciation/amortization 0 –79 –79
Impairment losses –17 –17
Other operating expenses –3,706 –444 –169 –1,381 –5,803 –1,446 –12,949
Operating income –139 0 231 0 44 30 38 383 587
Interest income 428 844 21 41 1,334
Interest expense –288 –313 –39 –559 –64 –1,263
Financial items 5 5
Income after financial items 1 1 0 –82 0 5 315 59 365 663
Taxes –19 –75 –14 –108
Profit for the year 1 0 –82 0 –14 240 59 351 555
Comprehensive Income for the year 1 0 –82 0 –14 240 59 351 555
Statement of financial position
Non-current assets 8,618 12,269 0 1,116 5,108 4,614 31,725
Current assets 266 386 29 10,479 3,756 2,472 17,388
Cash 380 35 797 14,518 605 16,335
Total assets 9,264 0 12,690 0 1,145 11,276 23,382 7,691 65,448
Equity attributable to equity holders 2 25 2,738 –51 1,352 55 4,300 8,419
Non-controlling interests 0
Financial non-current liabilities 8,259 9,943 1,196 9,770 21,706 647 51,521
Other non-current liabilities 584 584
Financial current liabilities 1,528 1,528
Other current liabilities 980 9 154 1,621 632 3,396
Total equity and liabilities 9,264 0 12,690 0 1,145 11,276 23,382 7,691 65,448
Skanska received the following dividend 3 15 241 256
Reconciliation with participations in joint ventures
Equity attributable to the investors in joint ventures 25 0 2,738 0 –51 1,352 55 4,300 8,419
Less equity attributable to investors other than Skanska –20 0 –1,502 0 26 –675 –42 –2,920 –5,133
Skanska’s portion of equity in joint ventures, adjusted for surplus value and goodwill 5 0 1,236 0 –25 677 13 1,380 3,286
+ Losses recognized as provisions 6 25 29 60
– Impairment losses –11 –8 –19
+ Elimination of intra-Group profit –36 –36
Carrying amount of participations 0 0 1,236 0 0 677 13 1,365 3,291
1 The amount includes impairment losses in the consolidated accounts.2 Equity includes subordinated loans from the owners.3 Dividend include interest paid on the subordinated loans.
Note 20 B. Continued
Details of Skanska’s significant joint venturesAll significant joint ventures are within Infrastructure Development. Major joint
ventures in which Skanska participates are reported below. The amounts corre-
spond to 100 percent of each joint venture’s income statement and statement
of financial position.
Skanska Annual Report 2017138 Notes including accounting and valuation principles
Note 20 B. Continued
Details of Skanska’s significant joint venturesAll significant joint ventures are within Infrastructure Development. Major joint
ventures in which Skanska participates are reported below. The amounts corre-
spond to 100 percent of each joint venture’s income statement and statement
of financial position.
Income statement
I4 Ultimate
Connect Plus Holdings
Ltd
Elizabeth River
Crossings Holdings
LLC
Gdansk Transport Company
S.A.
NPH Healthcare (Holdings)
Limited shares/
Paworth Hospital
Swedish Hospital Partners
Holdings AB LaGuardia
AirportOther joint
ventures
All joint ventures,
total
2016 2016 2016 2016 2016 2016 2016 2016 2016
Revenue 1,845 1,238 3,009 364 306 2,317 4,607 1,595 15,281
Depreciation/amortization –47 –24 –71
Impairment losses –79 –79
Other operating expenses –1,935 –1,064 –2,547 –180 –287 –2,284 –4,601 –1,470 –14,368
Operating income –90 174 415 184 19 33 6 22 763
Interest income 300 1,007 606 738 8 2,659
Interest expense –179 –729 –448 –13 –481 –48 –1,898
Financial items 0 –558 –558
Income after financial items 1 31 452 415 342 6 290 6 –576 966
Taxes –50 –65 –1 –37 –24 –177
Profit for the year 31 402 415 277 5 253 6 –600 789
Comprehensive Income for the year 31 402 415 277 5 253 6 –600 789
Statement of financial position
Non-current assets 7,047 13,066 15,095 969 9,925 23,572 8,645 78,319
Current assets 681 513 63 900 2,164 4,321
Cash 148 76 608 720 482 2,034
Total assets 7,876 0 13,655 15,766 969 9,925 25,192 11,291 84,674
Equity attributable to equity holders 2 –38 3,406 1,337 –60 855 7 5,188 10,695
Non-controlling interests 0
Financial non-current liabilities 7,641 10,216 12,721 984 8,611 23,737 2,208 66,118
Other non-current liabilities 509 459 968
Financial current liabilities 2,629 2,629
Other current liabilities 273 33 1,199 45 459 1,448 807 4,264
Total equity and liabilities 7,876 0 13,655 15,766 969 9,925 25,192 11,291 84,674
Skanska received the following dividend 3 28 90 240 358
Reconciliation with participations in joint ventures
Equity attributable to the investors in joint ventures –38 0 3,406 1,337 –60 855 7 5,188 10,695
Less equity attributable to investors other than Skanska 19 0 –1,703 –936 30 –429 –5 –3,306 –6,329
Skanska’s portion of equity in joint ventures, adjusted for surplus value and goodwill –19 0 1,703 401 –30 427 2 1,882 4,366
+ Losses recognized as provisions 30 30 79 139
– Impairment losses –331 –331
+ Elimination of intra-Group profit –37 –37
Carrying amount of participations 11 0 1,703 401 0 427 2 1,593 4,137
1 The amount includes impairment losses in the consolidated accounts.2 Equity includes subordinated loans from the owners.3 Dividend include interest paid on the subordinated loans.
Skanska Annual Report 2017 139Notes including accounting and valuation principles
Specification of significant holdings in joint operations, according to sales in current year
Name of joint operation Type CountryPercentage of share
capital
A14 Highway UK 33
AMP6 Thames water Water maintenance UK 33
Mid-Coast Transit Constructors Public transit USA 33
Regional Connector Constructors Public transit USA 63
Skanska Burns & McDonnell ECCO III Power plant USA 55
Skanska Koch - Kiewit Highway/bridges USA 54
Skanska Morrison Gas maintenance UK 50
Skanska/Walsh Airport USA 70
Skanska Ames Highway USA 60
Skanska Closner Hospital USA 85
Skanska-Granite-Lane Highway/bridge USA 40
Skanska-Traylor-Shea Public transit USA 50
SKW Constructors Tunnel USA 45
There are around 150 other small joint operations in the above countries, as well as in Sweden, Norway and the Czech Republic.
Note 20 B. Continued
Assets pledgedShares in joint ventures pledged as collateral for loans and other obligations
amount to SEK 1,925 M (2,682).
Other itemsSkanska’s joint ventures are owned by Skanska and other investors. Each are
capital-intensive projects and are financed in part by capital from the owning
parties, but the majority are financed via banks or financial institutions. The assets
of the respective joint ventures are used as collateral for the liabilities. According
to agreements with the banks, the ability to access bank account funds from these
joint ventures is restricted.
Skanska’s portion of the total investment obligations of partly owned joint
ventures amounts to SEK 2,677 M (3,849), of which Skanska has remaining obliga-
tions to invest SEK 1,183 M (1,402) in Infrastructure Development in the form
of equity holdings and loans. The remaining portion is expected to be financed
mainly in the form of bank loans or bonds in the respective joint ventures and in
the form of participations and loans from other co-owners.
Contingent liabilities for joint ventures amounted to SEK 814 M (1,379).
Associated companiesAssociated companies are reported in compliance with IAS 28 Investments in
Associates. See Note 1 Accounting and valuation principles.
The carrying amount of associated companies is SEK 23 M (23).
Information on the Group’s share of revenue, income, assets, liabilities and equity in associated companies
2017 2016
Revenue 26 30
Earnings 2 3
Assets 25 25
Equity 1 23 23
Liabilities 2 2
25 25
1 Reconciliation between equity and carrying amount of holdings, in accordance with the equity method of accounting..
2017 2016
Equity in associated companies 23 23
Adjustment for losses not recognized 0 0
Carrying amount 23 23
Other itemsThe associated companies have no liabilities or contingent liabilities which the
Group may become responsible for paying.
Nor are there any obligations for further investments.
Note 20 C. Joint operations
Skanska executes certain projects with a joint party without a separate legal
company being formed for the purpose. These projects are then classified as joint
operations in compliance with IFRS 11. Joint operations without the formation of
a separate company are found mainly in USA.
Skanska also executes certain projects with a joint party where a separate com-
pany is formed for the purpose. These projects are classified as joint operations
provided that the other criteria in IFRS 11 are fulfilled.
Skanska Annual Report 2017140 Notes including accounting and valuation principles
Note 21. Financial assets
Financial investments, financial receivables and shareholdings where ownership is less
than 20 percent and the Group has no significant influence are recognized as non-current
financial assets.
Financial investments and financial receivables are recognized as current financial as-
sets. See also Note 6 Financial instruments and financial risk management.
Financial non-current assets Dec 31, 2017 Dec 31, 2016
Financial investments
Financial assets at fair value through profit or loss
Derivatives 4 0
Hedge-accounted derivatives 2 2
Financial assets available for sale 1 42 44
48 46
Financial receivables, interest-bearing Receivables from joint ventures 98 204
Restricted cash 361 355
Net assets in funded pension plans 693 364
Other interest-bearing receivables 1,076 47
2,228 970
Total 2,276 1,016
of which interest-bearing non-current financial assets 2,228 970
of which non-interest-bearing non-current financial assets 48 46
Current financial assets Dec 31, 2017 Dec 31, 2016
Financial investments
Financial assets at fair value through profit or loss
Derivatives 83 170
Hedge-accounted derivatives 14 7
Held-to-maturity investments 1,240 1,295
1,337 1,472
Financial receivables, interest-bearing
Restricted cash and cash equivalents 4,748 7,938
Receivables from joint ventures 86 189
Other interest-bearing receivables 500 496
5,334 8,623
Total 6,671 10,095
of which interest-bearing current financial assets 6,574 9,918
of which non-interest-bearing current financial assets 97 177
Total carrying amount, financial assets 8,947 11,111
of which financial assets excluding shares 8,905 11,067
1 Shares recognized at the lower of cost and fair value are included in the amount of SEK 42 M (44). In 2017, shareholdings were affected by impairment losses of SEK 0 M (0).
Skanska Annual Report 2017 141Notes including accounting and valuation principles
Note 22. Current-asset properties/project development
Current-asset properties are recognized in compliance with IAS 2 Inventories.
See Note 1 Accounting and valuation principles.
The allocation of items in the statement of financial position by business
stream is presented below.
Business stream Dec 31, 2017 Dec 31, 2016
Commercial Property Develop-ment 23,615 19,728
Residential Development 15,395 13,950
Total 39,010 33,678
For a further description of the respective business streams, see Note 4 Operating
segments.
Current-asset properties are divided into completed properties, properties
under construction and development properties.
Impairment losses/reversals of impairment lossesCurrent-asset properties are valued in compliance with IAS 2 Inventories, and are
thus carried at cost or net realizable value, whichever is lower. Adjustment to net
realizable value via an impairment loss is recognized, as are reversals of previous
impairment losses, in the income statement under “Cost of production and
management.”
Net realizable value is affected by the type and location of the property and by
the yield requirement in the market.
The following table shows that impairment losses totaling SEK 0 M (0) were
reversed during the year.
Impairment losses
Reversals ofimpairment
losses Total
2017 2016 2017 2016 2017 2016
Commercial Property Develop-ment –3 –169 0 0 –3 –169
Residential Development –14 –42 0 0 –14 –42
Total –17 –211 0 0 –17 –211
Carrying amount
Completed properties Properties under construction Development properties Current-asset properties
Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016
Commercial Property Development 3,255 3,955 13,097 7,861 7,263 7,912 23,615 19,728
Residential Development 655 631 7,750 6,955 6,990 6,364 15,395 13,950
Total 3,910 4,586 20,847 14,816 14,253 14,276 39,010 33,678
Commercial Property Development Residential Development Total current-asset properties
2017 2016 2017 2016 2017 2016
Carrying amount
January 1 19,728 16,650 13,950 10,370 33,678 27,020
Investments 10,650 8,103 10,801 9,005 21,451 17,108
Carrying amount sold properties –5,862 –5,740 –9,414 –6,027 –15,276 –11,767
Impairment losses/reversals of impair-ment losses –3 –169 –14 –42 –17 –211
The year’s provision for intra-Group profits in contracting work –340 –166 –104 –30 –444 -196
Reclassifications –164 496 43 337 –121 833
Exchange rate differences for the year –394 554 133 337 –261 891
December 31 23,615 19,728 15,395 13,950 39,010 33,678
The carrying amount of current-asset properties is allocated between proper-
ties carried at cost and properties carried at net realizable value as shown in the
following table.
Cost Net realizable value Total
Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016
Commercial Property Development 22,893 19,646 722 82 23,615 19,728
Residential Development 15,123 13,942 272 8 15,395 13,950
Total 38,016 33,588 994 90 39,010 33,678
Skanska Annual Report 2017142 Notes including accounting and valuation principles
Note 22. Continued
Difference between fair value and carrying amount for current-asset properties
SEK bn
Surplus value Surplus value
Dec 31, 2017 Dec 31, 2016
Commercial Property Development
Completed projects 0.8 1.3
Undeveloped land and development properties 0.6 0.3
Ongoing projects 1 7.4 5.0
8.8 6.6
Residential Development
Undeveloped land and development properties 3.6 1.0
Total 12.4 7.6
1 Estimated market value. Internal appraisal, with valuation on respective completion dates.
Assets pledgedCurrent-asset properties pledged as collateral for loans and other obligations
amount to SEK 0 M (445). See Note 33 Assets pledged,contingent liabilities and
contingent assets.
Other itemsInformation about capitalized interest is presented in Note 15 Borrowing costs.
Skanska has committed to investing SEK 1,330 M (1,173) in current-asset properties.
Note 23. Inventories etc.
Inventories are reported in compliance with IAS 2 Inventories.
See Note 1 Accounting and valuation principles.
Dec 31, 2017 Dec 31, 2016
Raw materials and supplies 392 420
Products being manufactured 114 128
Finished products and merchandise 552 494
Total 1,058 1,042
There are no significant differences between the carrying amount for inventories
and their fair value.
No portion of inventories was adjusted due to an increase in net realizable
value.
No merchandise was used as collateral for loans and other obligations.
Note 24. Other operating receivables
Non-interest-bearing business receivables are reported as “Other operating
receivables.” Other operating receivables are part of the Group’s operating cycle
and are recognized as current assets.
Dec 31, 2017 Dec 31, 2016
Trade accounts receivable, joint ventures 0 139
Trade accounts receivable, others 20,249 23,676
Other operating receivables 4,558 3,122
Prepaid costs and accrued income 2,971 2,822
Total 27,778 29,759
Of which financial instruments reported in Note 6 Finan-cial instruments and financial risk management
Trade accounts receivable 20,249 23,815
Other operating receivables including accrued interest income 1,064 97
21,313 23,912
Of which non-financial instruments 6,465 5,847
Note 25. Cash and bank balances
“Cash and bank balances” consists of cash and available funds at banks and
equivalent credit institutions. Cash and bank balances totaled SEK 6,998 M
(5,430). The Group had no current investments on the closing day, or on the year-
earlier closing day.
Skanska Annual Report 2017 143Notes including accounting and valuation principles
Note 26. Equity/earnings per share
In the consolidated financial statements, equity is allocated between equity
attributable to equity holders (shareholders) and non-controlling interests
(minority interests). Non-controlling interests account for about one percent
of total equity.
Equity changed during the year as follows:
2017 2016
January 1 27,506 24,206
of which non-controlling interests 156 127
Total comprehensive income for the year
Profit for the year attributable to
Equity holders 4,095 5,722
Non-controlling interests 16 13
Other comprehensive income
Items that will not be reclassified to profit or loss for the period
Remeasurement of defined benefit plans 1 –399 –1,127
Tax related to items that will not be reclassified to profit or loss for the period 69 189
Total –330 –938
Items that have been or will be reclassified to profit or loss for the period –599 1,165
Translation differences attributable to equity holders 2 8 8
Translation differences attributable to non-controlling interests –125 36
Hedging of exchange rate risk in foreign operations 2 221 886
Effect of cash flow hedges 3
Tax related to items that have been or will be reclassified to profit or loss –25 –4
Total –520 2,091
Other comprehensive income for the year after tax –850 1,153
Comprehensive income for the year 3,261 6,888
of which attributable to equity holders 3,237 6,867
of which attributable to non-controlling interests 24 21
Other changes in equity not included in comprehensive income for the year
Dividend to equity holders –3,380 –3,075
Dividend to non-controlling interests –59 –6
Change in Group structure 0 14
Effect of share-based remuneration 297 272
Shares repurchased –440 –793
Total –3,582 –3,588
Equity, December 31 27,185 27,506
of which non-controlling interests 121 156
1 Remeasurement of defined–benefit pension plans, SEK –399 M (–1,127), together with tax, SEK 69 M (189), totaling SEK –330 M (–938), constitutes the Group’s total effect on other comprehensive income from the remeasurement of pensions recognized in compliance with IAS 19 and is recognized in retained earnings.
2 Translation differences attributable to equity holders, SEK –599 M (1,165), plus hedging of exchange rate risk in foreign operations, SEK –125 M (36), totaling SEK –724 M (1,201), constitute the change in the Group’s translation reserve.
3 The effect of cash flow hedges, SEK 221 M (886), together with taxes, SEK –25 M (–4), total-ing SEK 196 M (882), constitutes the change in the Group’s cash flow hedge reserve.
Equity attributable to equity holders is allocated as follows:
Dec 31, 2017 Dec 31, 2016
Share capital 1,260 1,260
Paid-in capital 2,528 2,231
Reserves 1,144 1,672
Retained earnings 22,132 22,187
Total 27,064 27,350
Paid-in capitalPaid-in capital in excess of quota (par) value from historical issues of new shares is
recognized as “Paid-in capital.” The change in 2017 and 2016 was attributable to
share-based payments and amounted to SEK 297 M (272).
Reserves 2017 2016
Translation reserve 1,759 2,483
Cash flow hedge reserve –615 –811
Total 1,144 1,672
Reconciliation of reserves 2017 2016
Translation reserve
January 1 2,483 1,282
Translation differences for the year –599 1,165
Less hedging on foreign exchange rate risk in operations outside Sweden –125 36
December 31 1,759 2,483
Cash flow hedge reserve
January 1 –811 –1,693
Cash flow hedges recognized in other comprehensive income
Hedges for the year –5 –965
Transferred to the income statement 226 1,851
Taxes attributable to hedging for the year –25 –4
December 31 –615 –811
Total reserves 1,144 1,672
Translation reserveThe translation reserve comprises accumulated translation differences from the
translation of financial reports for foreign operations. The translation reserve also
includes exchange rate differences that have arisen when hedging net invest-
ments in foreign operations. The translation reserve was reset at zero upon the
transition to IFRS on January 1, 2004.
Translation differences for the year amount to SEK -599 M (1,165) and consist of
negative translation differences mainly in USD and NOK, and of positive translation
differences in the other currencies in which the Group does business.
(For currency abbreviations, refer to Note 34 Foreign exchange rates and effect
of changes in foreign exchange rates.)
In 2017 the translation reserve was affected by exchange rate differences of
SEK –125 M (36) due to currency hedging.
The Group has currency hedges against net investments mainly in EUR, GBP
and USD.
The accumulated translation reserve totaled SEK 1,759 M (2,483).
Skanska Annual Report 2017144 Notes including accounting and valuation principles
Cash flow hedge reserveHedge accounting is applied mainly to Infrastructure Development.
Recognized in the cash flow hedge reserve are unrealized gains and losses on
hedging instruments.
The change during the year amounts to SEK 196 M (882), which is explained by
changes in exchange rates where forward contracts have been entered into for
future transactions in foreign currency and hedge accounting is applied, as well
as the fact that interest rate swaps have matured and been realized, which to a
certain extent is countered by changes in market interest rates.
The reserve at year-end amounted to SEK –615 M (–811).
Retained earningsRetained earnings include the profit for the year plus undistributed Group profits
earned in prior years. The Parent Company’s statutory reserve is part of retained
earnings, along with remeasurements of pension liabilities, which in compliance
with IAS 19 are recognized only under “Other comprehensive income.”
Remeasurement of defined-benefit pension plansIn 2017 equity was affected by remeasurement of defined–benefit plans in
the amount of SEK –330 M (–938) after taking into account social insurance
contributions and taxes. Remeasurement of pension obligations amounted to
SEK –1,024 M (–2,325) and is largely due to increased inflation assumptions for
the pension plans in Sweden and a reduced discount rate for the pension plans in
the UK. Remeasurement of plan assets amounted to SEK 690 M (1,303), which is
mainly due to the return on shares in 2017 exceeding the expected income – see
also Note 28 Pensions.
2017 2016
Remeasurement of pension obligations –1,024 –2,325
Difference between expected and actual return on plan assets 690 1,303
Social insurance contributions including special payroll tax –65 –105
Taxes 69 189
Total –330 –938
IFRS 2 Share-based PaymentThe share incentive programs introduced in 2014 and 2017 respectively are
recognized as share-based payment, which is settled with an equity instrument
in compliance with IFRS 2. This means that fair value is calculated on the basis of
estimated fulfillment of established financial targets during the measurement
period. After the end of the measurement period the fair value is established. This
value is allocated over the three-year vesting period. There is no reappraisal after
fair value is established during the remainder of the vesting period, aside from
changes in the number of shares because the condition of continued employment
during the vesting period is no longer fulfilled.
DividendAfter the closing day, the Board of Directors proposed a regular dividend of
SEK 8.25 (8.25) per share for the 2017 financial year.
The dividend for 2017 is expected to amount to SEK 3,372 M (3,380).
No dividend is paid for the Parent Company’s holding of Series B shares. The total
dividend amount may change by the record date, depending on repurchases of shares
and transfers of Series B shares to participants in Skanska’s long-term employee
ownership programs. The dividend is subject to the approval of the Annual General
Meeting on April 13, 2018.
Note 26. Continued
SharesInformation on the number of shares as well as earnings and equity per share is
presented in the table below.
2017 2016
Number of shares at year-end 419,903,072 419,903,072
of which Series A shares 19,755,414 19,793,202
of which Series B shares 400,147,658 400,109,870
Average price, repurchased shares, SEK 137.31 132.18
of which repurchased during the year 2,350,000 4,345,000
Number of Series B treasury shares, December 31 11,190,028 10,594,644
Number of shares outstanding, December 31 408,713,044 409,308,428
Average number of shares outstanding 409,447,407 409,896,419
Average number of shares outstanding after dilution 411,905,245 412,174,095
Average dilution, % 0.60 0.55
Earnings per share, SEK 10.00 13.96
Earnings per share after dilution, SEK 9.94 13.88
Equity per share, SEK 66.22 66.82
Change in number of sharesNumber on January 1 409,308,428 411,036,849
Number of Series B shares repurchased –2,350,000 –4,345,000
Number of shares transferred to employees 1,754,616 2,616,579
Number on December 31 408,713,044 409,308,428
Dilution effectIn the employee ownership programs introduced in 2014 and 2017 the number of
potential ordinary shares is calculated during the measurement period based on
the estimated number of shares that will be issued upon fulfillment of the estab-
lished targets. After the end of the measurement period, Skanska establishes the
number of shares that may be issued provided that the requirement of continued
employment is fulfilled. The number of potential ordinary shares thus calculated
is then reduced by the difference between the payment Skanska is expected to
receive and the average share price during the period.
Excluding social insurance contributions, the cost of both employee ownership
programs is estimated at a total of about SEK 1,173 M, allocated over three years,
corresponding to 6,482,282 shares. The maximum dilution at the end of the vest-
ing period is estimated at 1.15 percent.
In 2017 the cost of both programs amounted to SEK 297 M, excluding social
insurance contributions. Share awards earned but not yet allocated by the end
of 2017 totaled 2,434,770 shares. The dilution effect up to and including 2017
totaled 0.60 percent.
Capital managementCapital requirements vary between business streams. Skanska’s construction
projects are mainly based on customer funding. As a result, in its Construction
business stream, the company can operate with negative (free) working capital.
The free working capital within the Construction business stream together
with profits from the Group’s operations, as well as the possibility of increasing
borrowing through credit financing, make it possible for Skanska to finance
investments in its own project development. In light of the Construction business
stream’s large volumes with differentiated risk in various types of assignments
and client demands for guarantees, such as performance guarantees in publicly
procured projects in USA market, the equity requirement is significant. It is also
necessary to take into account financing of goodwill and future investments in
project development.
A number of financial targets have been established that are judged to best
reflect the profitability of the operations and best demonstrate the financial
Skanska Annual Report 2017 145Notes including accounting and valuation principles
Note 26. Continued
scope for investments and growth. The return on equity and on capital employed
is a measure of how well the capital provided by the shareholders and lenders is
being used.
The target for 2016–2020 is a return on the Group’s equity of at least 18 per-
cent and a return on capital employed, calculated jointly for the business streams
within Project Development, of at least 10 percent Skanska’s dividend policy is
to pay out 40–70 percent of net profit for the year after tax to the shareholders,
provided that the company’s overall financial situation is stable.
The Board has determined that the Group’s equity is at a reasonable level
based on what Skanska’s financial position and market circumstances require.
Note 27. Financial liabilities
Financial liabilities are allocated between non-current and current liabilities.
Normally, a maturity date within one year is required if a liability is to be treated
as current. This does not apply to discounted operating liabilities, which are part
of Skanska’s operating cycle and are therefore recognized as current liabilities
regardless of their maturity date.
For information on financial risks and financial policy, see Note 6 Financial
instruments and financial risk management.
Non-current financial liabilities Dec 31, 2017 Dec 31, 2016
Financial liabilities at fair value through profit or loss
Derivatives 5 48
Hedge-accounted derivatives 16 68
Other financial liabilities
Liabilities to credit institutions 2,265 611
Liabilities to joint ventures 0 10
Other liabilities 1,571 2,919
Total 3,857 3,656
of which interest-bearing non-current financial liabilities 3,836 3,540
of which non-interest-bearing non-current financial liabilities 21 116
Current financial liabilities
Financial liabilities at fair value through profit or lossDerivatives 115 48
Hedge-accounted derivatives 22 1
Other financial liabilities
Construction loans to cooperative housing associations 5,961 4,839
Liabilities to credit institutions 0 110
Other liabilities 1,526 1,683
Total 7,624 6,681
of which interest-bearing current financial liabilities 7,487 6,632
of which non-interest-bearing current financial liabilities 137 49
Total carrying amount for financial liabilities 11,481 10,337
Note 28. Pensions
Pension provisions are recognized in accordance with IAS 19 Employee Benefits.
See Note 1 Accounting and valuation principles.
Pension liability according to the statement of financial positionAccording to the statement of financial position, interest-bearing pension liabili-
ties amounted to SEK 5,603 M (4,901) and interest-bearing pension receivables
amounted to SEK 693 M (364). The net amount of interest-bearing pension liabili-
ties and interest-bearing pension receivables was SEK 4,910 M (4,537).
Skanska has defined-benefit pension plans in Sweden, Norway and the UK. The
pension in these plans is mainly based on final salary or average earnings during
the term of employment. The plans include a large number of employees, but
Skanska also has defined-contribution plans in these countries. Group companies
in other countries have pension plans reported as defined-contribution plans.
Defined-benefit plansThe pension plans mainly consist of retirement pensions. Each respective employer
usually has an obligation to pay a lifetime pension. Benefits are based on the num-
ber of years of employment. The employee must belong to the plan for a certain
number of years to earn a full retirement pension entitlement. For each year, the
employee earns increased pension entitlements, which are reported as pension
earned during the period plus an increase in pension obligation.
Pension plans are funded by securing pension obligations with assets in pen-
sion funds and provisions in the accounts.
The plan assets in Sweden and the UK are smaller than the pension obligations.
The difference is therefore recognized as a liability in the statement of financial
position. The plan assets in Norway exceed the pension obligations. The differ-
ence is therefore recognized as a receivable. The ceiling rule which, in some cases,
limits the value of these assets in the accounts does not apply according to the
existing pension foundation statutes, with the exception of one of the plans in
Norway and one of the smaller plans in the UK. The carrying amount of the plan
assets was reduced by SEK 20 M (48) due to the limit in the ceiling rule.
On the closing day the pension obligation amounted to SEK 23,271 M (21,803).
The obligation for pensions increased mainly due to remeasurements of pension
obligations as a result of increased inflation assumptions for the pension plans
in Sweden and a reduced discount rate for the pension plans in the UK. The
remeasurements are included in other comprehensive income and for 2017 the
net result was SEK 1,024 M (2,325). Pension obligations have also increased due to
the costs for vested pensions and interest expense exceeding pensions paid, which
was partially offset by lower exchange rates for Norwegian kroner.
Plan assets amounted to SEK 18,361 M (17,266). The plan assets increased in
value due to paid-in funds and the actual return on plan assets exceeding benefits
paid, which was to some extent offset by lower exchange rates for Norwegian
kroner. The result of remeasurement of plan assets via other comprehensive
income in 2017 was SEK 690 M (1,303), which is mainly due to the real return on
shares in 2017 exceeding the expected return.
The return on plan assets recognized in the income statement amounted to
SEK 472 M (518), while the actual return amounted to SEK 1,162 M (1,821). The
higher return was mainly attributable to the pension plans in Norway and the UK.
The plan assets mainly consist of equities, interest-bearing securities, mutual
fund units and investments in properties and infrastructure projects. No assets are
used in Skanska’s operations. The number of directly owned shares in Skanska AB
totaled 370,000 (370,000) Series B shares. There is also an insignificant percent-
age of indirectly owned shares in Skanska AB via investments in various mutual
funds.
There are various types of risk inherent in the company’s defined-benefit pen-
sion plans. Pension obligations are mainly affected by the relevant discount rate,
wage increases, inflation and life expectancy. The risk inherent in the plan assets
is mainly market risk. Overall, these risks may result in volatility in the company’s
equity and in increased future pension expenses and higher than estimated
pension disbursements. Skanska continually monitors changes in its pension
commitments and updates assumptions at least quarterly. Pension commitments
are calculated by independent actuaries. The company has prepared policy docu-
ments for the management of plan assets in the form of investment guidelines
regulating permitted investments and allocation frameworks for these. In addi-
Skanska Annual Report 2017146 Notes including accounting and valuation principles
tion, the company uses external investment advisors who continually monitor
development of the plan assets. The long duration of the pension commitments is
partly matched by long-term investments in infrastructure projects and property
investments and investments in long-term interest-bearing securities.
The largest defined-benefit plan for Skanska in Sweden is the ITP 2 plan, in
which pensions are based on final salary on retirement. ITP 2 covers salaried
employees born in 1978 or earlier. The pension commitments are secured through
assets in a pension foundation and through insurance with PRI Pensionsgaranti.
The pension commitment is lifelong and sensitive to changes in the discount rate,
pay increases, inflation and life span.
A small portion of the ITP 2 plan is secured by insurance from the retirement
insurance company Alecta. This is a multi-employer insurance plan, and there is
insufficient information to report these obligations as a defined-benefit plan.
Pensions secured by insurance from Alecta are therefore reported as defined-con-
tribution plans. Contributions paid in 2017 amounted to about SEK 3 (3) M. At the
end of 2017, the collective consolidated level of defined-benefit plans in Alecta
totaled preliminary 154 percent (149). The collective consolidated level consists of
assets as a percentage of actuarial obligations.
Within Skanska Norway, the largest defined-benefit pension plan is the
Skanska Norge Pensionskassa pension fund. This plan covered almost all employ-
ees of Skanska in Norway and the pension is based on final salary and number
of years of employment with Skanska. The pension commitments are secured
through assets in the pension fund. The pension commitment is lifelong and sensi-
tive to changes in the discount rate, pay increases, inflation and life expectancy.
The largest of Skanska’s defined-benefit pension plans in the UK is the Skanska
Pension Fund. The plan covers salaried employees and is based on average earn-
ings over the period of employment. The pension is remeasured following chang-
es in inflation (index-linked). The pension commitments are secured through
assets in the pension fund. The pension commitment is sensitive to changes in the
discount rate, inflation and life span.
Net liability related to employee benefits, defined-benefit plans
2017 2016
Pension obligations, funded plans, present value, December 31 23,271 21,803
Plan assets, fair value, December 31 –18,361 –17,266
Net pension liability according to the statement of financial position 4,910 4,537
Pension obligations and plan assets by country
Sweden Norway UK Total
2017
Pension obligations 8,781 3,941 10,549 23,271
Plan assets –4,392 –4,634 –9,335 –18,361
Net pension liability according to the statement of financial position 4,389 –693 1,214 4,910
2016
Pension obligations 8,086 3,984 9,733 21,803
Plan assets –4,290 –4,348 –8,628 –17,266
Net pension liability according to the statement of financial position 3,796 –364 1,105 4,537
Interest-bearing pension liability, net
2017 2016
Net pension liability, January 1 4,537 3,740
Pension expenses 861 763
Benefits paid by employers –226 –226
Funds contributed by employers –571 –464
Remeasurements 1 334 1,022
Divestments 0 –123
Curtailments and settlements –49 –62
Exchange rate differences 24 –113
Net liability according to the statement of financial position 4,910 4,537
1 See also Note 26, which shows the tax portion and social insurance contributions recog-nized in other comprehensive income.
Pension obligations
2017 2016
January 1 21,803 19,646
Pensions earned during the year 768 671
Interest on obligations 574 619
Benefits paid by employers –226 –226
Benefits paid from plan assets –364 –340
Remeasurements:
– Actuarial gains (–), losses (+) changed financial assumptions 1,123 2,860
– Actuarial gains (–), losses (+) changed demo-graphic assumptions –97 –155
– Experience-based changes –2 –380
Divestments 0 –205
Curtailments and settlements 1 –49 –62
Exchange-rate differences –259 –625
Pension obligations, present value 23,271 21,803
1 For 2017: relates to curtailments in Norway.
Distribution of pension obligations and average duration by country
Sweden Norway UK
2017
Active members’ portion of obligations 37% 48% 17%
Dormant pension rights 25% 11% 48%
Pensioners’ portion of obligations 38% 41% 35%
Weighted average duration 19 years 20 years 21 years
2016
Active members’ portion of obligations 38% 53% 16%
Dormant pension rights 24% 5% 50%
Pensioners’ portion of obligations 38% 42% 34%
Weighted average duration 19 years 20 years 21 years
Note 28. Continued
Skanska Annual Report 2017 147Notes including accounting and valuation principles
Note 28. Continued
Plan assets
2017 2016
January 1 17,266 15,906
Estimated Interest income on plan assets 472 518
Funds contributed by employers 571 464
Funds contributed by employees 9 9
Benefits paid –364 –340
Difference between actual return and estimated Interest income 690 1,303
Divestments 0 –82
Exchange rate differences –283 –512
Plan assets, fair value 18,361 17,266
Amounts contributed are expected to total about SEK 400 M in 2018.
Plan assets not included in carrying amount due to the limit in the ceil-ing rule
2017 2016
January 1 48 1
Change for the year –28 47
Plan assets not included in carrying amount 20 48
Plan assets and return by country
Sweden Norway UK
2017
Equities 29% 39% 29%
Interest-bearing securities 28% 42% 41%
Alternative investments 43% 19% 30%
Estimated return 2.50% 3.00% 2.75%
Actual return 4.20% 9.40% 6.40%
2016
Equities 26% 38% 29%
Interest-bearing securities 29% 42% 38%
Alternative investments 45% 20% 33%
Estimated return 3.00% 2.75% 3.75%
Actual return 7.90% 7.10% 15.60%
Total plan assets by asset class
Equities and mutual funds: 2017 2016
Swedish equities and mutual funds 408 379
Norwegian equities and mutual funds 692 682
UK equities and mutual funds 840 956
Global mutual funds 3,825 3,277
Total equities and mutual funds 5,765 5,294
Interest-bearing securities:Swedish bonds 925 958
Norwegian bonds 907 952
UK bonds 2,934 3,297
Bonds in other countries 2,197 1,180
Total interest-bearing securities 6,963 6,387
Alternative investments:Hedge funds 385 970
Property investments 1,573 1,531
Infrastructure projects 1,844 1,626
Other 1,831 1,458
Total alternative investments 5,633 5,585
Total plan assets 18,361 17,266
Equities and mutual funds, interest-bearing securities and hedge funds were mea-
sured at current market prices. Property investments and infrastructure projects
were measured by discounting future cash flow. About 75 percent of total plan
assets have a quoted price on an active market.
Actuarial assumptions
Sweden Norway UK
2017Financial assumptionsDiscount rate, January 1 2.50% 3.00% 2.75%
Discount rate, December 31 2.50% 2.75% 2.50%
Estimated return on plan assets for the year 2.50% 2.75% 2.50%
Expected pay increase, December 31 3.00% 2.25% 3.50%
Expected inflation, December 31 2.00% 1.75% 3.25%
Demographic assumptions
Life expectancy after age 65, men 23 years 21 years 24 years
Life expectancy after age 65, women 25 years 24 years 25 years
Life expectancy table PRI K2013 S2
2016Financial assumptionsDiscount rate, January 1 3.00% 2.75% 3.75%
Discount rate, December 31 2.50% 3.00% 2.75%
Estimated return on plan assets for the year 3.00% 2.75% 3.75%
Expected pay increase, December 31 3.00% 2.50% 3.50%
Expected inflation, December 31 1.50% 2.00% 3.25%
Demographic assumptions
Life expectancy after age 65, men 23 years 21 years 24 years
Life expectancy after age 65, women 25 years 24 years 25 years
Life expectancy table PRI K2013 S2
Skanska Annual Report 2017148 Notes including accounting and valuation principles
All three countries where Skanska has defined-benefit plans have an extensive
market for high-grade long-term corporate bonds, including mortgage bonds.
The discount rate is established on the basis of the market yield for these bonds
on the closing day.
Sensitivity of pension obligations to changes in assumptions
Sweden Norway UK Total 1
Pension obligations, December 31, 2017 8,781 3,941 10,549 23,271
Discount rate increase of 0.25% –400 –200 –550 –1,150
Discount rate decrease of 0.25% 400 200 550 1,150
Increase of 0.25% in expected pay increase 100 75 0 175
Reduction of 0.25% in expected pay increase –100 –75 0 –175
Increase of 0.25% in expected inflation 325 150 350 825
Decrease of 0.25% in expected inflation –325 –150 –350 –825
Life expectancy increase of 1 year 350 175 325 850
1 Estimated change in pension obligation/pension liability in the event of a change in the assumption for all three countries. If pension liability increases, the Group’s equity is reduced by about 90 percent of the increase in pension liability, after taking into account deferred tax and social insurance contributions.
Sensitivity of plan assets to changes in estimated return
Sweden Norway UK Total 1
Plan assets, December 31, 2017 4,392 4,634 9,335 18,361
Return increase of 5% 220 230 470 920
Return decrease of 5% –220 –230 –470 –920
1 If actual return exceeds the estimated return by 5 percent, the gain upon remeasurement is expected to amount to around SEK 920 M. If actual return falls below the estimated return by 5 percent, the loss upon remeasurement is expected to amount to around SEK 920 M.
The sensitivity analysis is based on existing circumstances, assumptions and popu-
lations. Application at other levels may produce different effects of changes.
Defined-contribution plansThese plans mainly cover retirement pension, disability pension and family pen-
sion. The premiums are paid regularly during the year by the respective Group
company to separate legal entities, for example insurance companies. The size of
the premium is based on salary. The pension expense for the period is included in
the income statement.
Note 28. Continued
Total pension expenses in the income statement for defined-benefit plans and defined-contribution plans
2017 2016
Defined-benefit pensions vested during the year –768 –671
Less: Funds contributed by employees 9 9
Interest on obligations –574 –619
Estimated return on plan assets 472 518
Curtailments and settlements 49 62
Pension expenses, defined-benefit plans –812 –701
Pension expenses, defined-contribution plans –1,393 –1,413
Social insurance contributions, defined-benefit and defined-contribution plans 1 –139 –131
Total pension expenses –2,344 –2,245
1 Refers to special payroll tax in Sweden and employer fee in Norway.
Allocation of pension expenses in the income statement
2017 2016
Cost of production and management –1,731 –1,711
Selling and administrative expenses –511 –433
Financial items –102 –101
Total pension expenses –2,344 –2,245
Skanska Annual Report 2017 149Notes including accounting and valuation principles
Note 29. Provisions
Provisions are reported in compliance with IAS 37 Provisions, Contingent Liabili-
ties and Contingent Assets. See Note 1 Accounting and valuation principles.
Provisions are allocated in the statement of financial position between non-
current liabilities and current liabilities. Provisions are both interest-bearing and
non-interest-bearing. Provisions that are part of Skanska’s operating cycle are
recognized as current. Interest-bearing provisions that fall due within a year are
treated as current.
Dec 31, 2017 Dec 31, 2016
Non-current provisions
Interest-bearing 0 1
Current provisions
Interest-bearing 0 25
Non-interest-bearing 8,557 7,202
Total 8,557 7,228
The change in provisions broken down into reserve for legal disputes, provisions
for warranty obligations and other provisions is presented in the following table.
Reserve for legal disputesProvision for
warranty obligations Other provisions Total
2017 2016 2017 2016 2017 2016 2017 2016
January 1 950 1,085 2,938 2,678 3,340 2,669 7,228 6,432
Divested provisions 0 0 0 –4 0 –4 0 –8
Provisions for the year 600 731 1248 944 1,393 1,669 3,241 3,344
Provisions utilized –394 –547 –660 –510 –380 –859 –1,434 –1,916
Unutilized amounts that were reversed, change in value –180 –422 –309 –226 –71 –80 –560 –728
Exchange rate differences 7 19 39 –1 –5 69 41 87
Reclassifications –42 84 44 57 39 –124 41 17
December 31 941 950 3,300 2,938 4,316 3,340 8,557 7,228
Specification of “Other provisions”
2017 2016
Provisions for restructuring measures 603 470
Employee-related provisions 334 350
Environmental obligations 108 126
Provision for social insurance contributions on pensions 909 752
Contingent considerations 1 838 533
Provisions for commitments in i joint ventures 60 139
Other provisions 1,464 970
Total 4,316 3,340
1 Of which SEK 838 M (533) is from acquisitions of current-asset properties. These are reported as financial instruments. See Note 6.
The normal cycle time for “Other provisions” is about one to three years.
Provisions for warranty obligations are for expenses that may arise during
the warranty period. Such provisions in Construction are based on individual
assessments of each project or average experience-based cost, expressed as a
percentage of sales during a five-year period. The expenses are charged to each
project on a continuous basis. Provisions for warranty obligations in other busi-
ness streams are based on individual assessments of each project. The change in
2017 was mainly related to Construction.
Provisions for legal disputes refer to provisions in the Construction business
stream for projects that have been completed.
Provisions for restructuring measures mainly include items related to Poland
and the discontinuation of operations in Latin America.
Employee-related provisions include such items as the cost of profit-sharing,
certain bonus programs and other obligations to employees.
Provisions for environmental obligations include the costs of restoring gravel
pits to their natural state in Swedish operations.
Note 30. Other operating liabilities
Non-interest-bearing liabilities in business operations are recognized as “Other operating liabilities.” Such liabilities are part of the Group’s operating cycle and are recognized as current liabilities.
Dec 31, 2017 Dec 31, 2016
Trade accounts payable 15,638 15,520
Other operating liabilities to associated companies 15 0
Other operating liabilities 1 7,454 6,439
Accrued expenses and prepaid income 15,321 14,121
Total 38,428 36,080
Of which financial instruments reported in Note 6 Financial instruments and financial risk management
Trade accounts payable 15,638 15,520
Other operating liabilities including accrued interest expense 496 694
16,134 16,214
Of which non-financial instruments 22,294 19,866
1 “Other operating liabilities” includes SEK 491 M (538) for checks issued but not yet cashed in
USA. See Note 1 Accounting and valuation principles.
.
Skanska Annual Report 2017150 Notes including accounting and valuation principles
Note 31.Specification of interest-bearing net receivables/liabilities per asset and liability
The following table shows the breakdown of financial current and non-current
assets as well as liabilities between interest-bearing and non-interest-bearing items.
Dec 31, 2017 Dec 31, 2016
Interest-bearingNon interest-
bearing Total Interest-bearingNon interest-
bearing Total
ASSETS
Non-current assets
Property, plant and equipment 6,874 6,874 6,837 6,837
Goodwill 4,554 4,554 5,270 5,270
Other intangible assets 962 962 1,034 1,034
Investments in joint ventures and associated companies 3,314 3,314 4,160 4,160
Financial non-current assets 2,228 48 2,276 970 46 1,016
Deferred tax assets 1,757 1,757 1,649 1,649
Total non-current assets 2,228 17,509 19,737 970 18,996 19,966
Current assets
Current-asset properties 39,010 39,010 33,678 33,678
Inventories 1,058 1,058 1,042 1,042
Financial current assets 6,574 97 6,671 9,918 177 10,095
Tax assets 1,188 1,188 784 784
Gross amount due from customers for contract work 6,997 6,997 5,751 5,751
Other operating receivables 27,778 27,778 29,759 29,759
Cash 6,998 6,998 5,430 5,430
Total current assets 13,572 76,128 89,700 15,348 71,191 86,539
TOTAL ASSETS 15,800 93,637 109,437 16,318 90,187 106,505
LIABILITIES
Non-current liabilities
Financial non-current liabilities 3,836 21 3,857 3,540 116 3,656
Pensions 5,603 5,603 4,901 4,901
Deferred tax liabilities 1,235 1,235 1,491 1,491
Non-current provisions 0 0 1 1
Total non-current liabilities 9,439 1,256 10,695 8,442 1,607 10,049
Current liabilities
Financial current liabilities 7,487 137 7,624 6,632 49 6,681
Tax liabilities 312 312 489 489
Current provisions 0 8,557 8,557 25 7,202 7,227
Liabilities to clients for contract work 16,636 16,636 18,473 18,473
Other operating liabilities 38,428 38,428 36,080 36,080
Total current liabilities 7,487 64,070 71,557 6,657 62,293 68,950
TOTAL LIABILITIES 16,926 65,326 82,252 15,099 63,900 78,999
Total equity 27,185 27,506
EQUITY AND LIABILITIES 109,437 106,505
Interest-bearing net receivables/net debt –1,126 1,219
Skanska Annual Report 2017 151Notes including accounting and valuation principles
Note 32. Expected recovery periods of assets and liabilities
Amounts expected to be recovered
Dec 31, 2017 Dec 31, 2016
Within 12 months After 12 months Total Within 12 months After 12 months Total
ASSETS
Non-current assets
Property, plant and equipment 1 1,415 5,459 6,874 1,305 5,532 6,837
Goodwill 4,554 4,554 5,270 5,270
Other intangible assets 1 175 787 962 135 899 1,034
Investments in joint ventures and associated companies 2 3,314 3,314 4,160 4,160
Financial non-current assets 2,276 2,276 1,016 1,016
Deferred tax assets 3 1,757 1,757 1,649 1,649
Total non-current assets 1,590 18,147 19,737 1,440 18,526 19,966
Current assets
Current-asset properties 4 19,000 20,010 39,010 17,000 16,678 33,678
Inventories 474 584 1,058 484 558 1,042
Financial current assets 6,671 6,671 10,095 10,095
Tax assets 1,188 1,188 784 784
Receivables from clients for contract work 5 5,909 1,088 6,997 4,457 1,294 5,751
Other operating receivables 5 23,843 3,935 27,778 28,110 1,649 29,759
Cash 6,998 6,998 5,430 5,430
Total current assets 64,083 25,617 89,700 66,360 20,179 86,539
TOTAL ASSETS 65,673 43,764 109,437 67,800 38,705 106,505
LIABILITIES
Non-current liabilities
Financial non-current liabilities 180 3,677 3,857 227 3,429 3,656
Pensions 6 249 5,354 5,603 251 4,650 4,901
Deferred tax liabilities 1,235 1,235 1,491 1,491
Non-current provisions 0 0 1 1
Total non-current liabilities 429 10,266 10,695 478 9,571 10,049
Current liabilities
Financial current liabilities 5,636 1,988 7,624 4,869 1,812 6,681
Tax liabilities 312 312 489 489
Current provisions 3,409 5,148 8,557 2,791 4,436 7,227
Liabilities to clients for contract work 14,187 2,449 16,636 15,328 3,145 18,473
Other operating liabilities 36,922 1,506 38,428 35,314 766 36,080
Total current liabilities 60,466 11,091 71,557 58,791 10,159 68,950
TOTAL LIABILITIES 60,895 21,357 82,252 59,269 19,730 78,999
Total equity 27,185 27,506
EQUITY AND LIABILITIES 109,437 106,505
1 In the case of amounts expected to be recovered within 12 months, expected annual depreciation/amortization has been recognized. 2 The breakdown cannot be estimated.3 Deferred tax assets are expected to be recovered in their entirety after 12 months.4 Recovery of current-asset properties within one year is based on a historical assessment from the past three years.5 Current receivables that fall due in more than 12 months’ time are part of the operating cycle and are thus recognized as current.6 “Within 12 months” refers to expected benefit payments (payments from funded plans are not included).
Skanska Annual Report 2017152 Notes, including accounting and valuation principles
Note 33. Assets pledged, contingent liabilities and contingent assets
Assets pledged
2017 2016
Mortgages, current-asset properties 0 445
Shares and participations 1,925 2,682
Receivables 940 1,021
Total 2,865 4,148
Joint ventures within the Infrastructure Development business stream are
reported as pledged assets when the holdings in the project company, which may
be owned directly by Skanska or owned through intermediary holding companies,
are provided as security for loans from banks or lenders other than the co-
owners. The comparative year has been restated according to this principle.
Assets pledged for liabilities
Property mortgage
Shares and receivables Total
2017 2016 2017 2016 2017 2016
Own obligations
Liabilities to credit institutions 0 445 0 44 0 489
Other liabilities 940 977 940 977
Total own obligations 0 445 940 1,021 940 1,466
Other obligations 1,925 2,682 1,925 2,682
Total 0 445 2,865 3,703 2,865 4,148
Assets pledged for other liabilities, SEK 1.0 billion (1.0), relate predominantly to
financial instruments pledged as collateral to clients in conjunction with contract-
ing work in USA.
Contingent liabilitiesContingent liabilities are reported in compliance with IAS 37 Provisions, Con-
tingent Liabilities and Contingent Assets. See Note 1 Accounting and valuation
principles.
2017 2016
Contingent liabilities related to joint construction operations 46,830 59,857
Contingent liabilities related to other joint operations 28 28
Contingent liabilities related to joint ventures 814 1,379
Other contingent liabilities 1,260 631
Total 48,932 61,895
The Group’s contingent liabilities related to contracting work executed jointly
with other contractors totaled SEK 46.8 billion (59.9). This amount refers to the
portion of the joint and several liability relating to the obligations of the joint
operation in question that affect other participants in the joint operation. Such
liability is often required by the customer. To the extent it is deemed likely that
Skanska will be subject to liability claims, the obligation is reported as a liability.
Contingent liabilities related to joint ventures refer mainly to guarantees issued
for joint ventures belonging to the Residential Development and Commercial
Property Development business streams.
In the Group’s other contingent liabilities, nearly SEK 1.3 billion (0.6) relates
mainly to obligations for residential projects.
Skanska selectively forms joint operations and joint ventures when beneficial in
view of project size and/or the type of commitments involved in the project. Com-
bining expertise and resources with other construction companies is then a means
of optimizing project planning and execution as well as managing specific project
risks. External partners in these arrangements are scrutinized in accordance with
the tender approval process. For more information regarding joint operations and
joint ventures, see Note 20 B and Note 20 C.
In December 2016 Skanska received a claim from the Maltese government
regarding defective concrete in the Mater Dei hospital, a hospital in Malta that
Skanska International was involved in starting in 1995. Skanska is contesting this
claim in its entirety, on both formal and material grounds. Arbitration proceed-
ings have been initiated, but Skanska has not yet formally been served with the
writ calling for arbitration.
In October 2016, Helsinki Court of Appeal in Finland ruled on the damages
claim relating to the asphalt cartel. The Court of Appeal denied parts of the
municipalities’ claim against Skanska. One municipality was given leave to appeal
by the Supreme Court, while two municipalities’ petitions for leave to appeal
have been stayed. The Supreme Court has referred the case for a ruling by the
European Court of Justice, which is likely to delay the proceedings for one to two
years.
As Skanska announced in March 2015, the Administrative Council of Economic
Defence (CADE) and the Comptroller General (CGU) in Brazil included Skanska
Brazil in their investigation into corruption and cartels linked to specific Petrobas
projects. At the end of 2015 two administrative legal proceedings were initiated
aimed at Skanska Brazil and twenty other companies. In June 2016 the CGU (now
the Ministry of Transparency, Inspection and Control) excluded Skanska from par-
ticipating in public procurement negotiations in Brazil for a period of no less than
two years. CADE’s legal proceedings are still in their early stages and are expected
to last for several years.
Other authorities in Brazil have initiated legal proceedings based on the same
investigations. As Skanska announced in April 2016 the Brazilian government
(AGU) has filed a lawsuit against seven companies, one of which is Skanska Brazil,
and seven individuals unconnected to Skanska. The lawsuit focuses on alleged
payments made by a joint venture partner of Skanska Brazil. The first and second
instance courts dismissed the case against Skanska. The decision was appealed by
the AGU to the highest instance and leave to appeal was granted. There is great
uncertainty about how these proceedings will develop and when they will be
concluded.
From time to time, disputes arise with clients about contractual terms related
to both ongoing and completed projects. Their outcomes are often difficult to
predict. To the extent it is probable that a dispute will lead to an expense for the
Group, this is taken into account in the financial statements.
Contingent assetsThe Group has no contingent assets of significant importance in assessing the
position of the Group. See Note 1 Accounting and valuation principles.
Skanska Annual Report 2017 153Notes, including accounting and valuation principles
Not 34. Foreign-exchange rates and effect of changes in foreign exchange rates
Exchange rates are dealt with in compliance with IAS 21 The Effect of Changes in
Foreign Exchange Rates. See Note 1 Accounting and valuation principles.
Exchange rates In 2017 the Swedish krona fluctuated against currencies in countries which the
Group does business.
Currency Country
Average exchange rate Change, percent
2017 2016 2015 2016–2017 2015–2016
CZK Czech Republic 0.366 0.350 0.343 5 2
DKK Denmark 1.296 1.272 1.254 2 1
EUR EU 9.638 9.468 9.357 2 1
GBP UK 11.002 11.587 12.890 –5 –10
NOK Norway 1.033 1.019 1.048 1 –3
PLN Poland 2.265 2.170 2.238 4 –3
USD USA 8.549 8.559 8.435 0 1
Currency Country
Average exchange rate Change, percent
2017 2016 2015 2016–2017 2015–2016
CZK Czech Republic 0.384 0.354 0.339 9 4
DKK Denmark 1.321 1.287 1.229 3 5
EUR EU 9.834 9.571 9.171 3 4
GBP UK 11.081 11.150 12.433 –1 –10
NOK Norway 1.000 1.053 0.956 –5 10
PLN Poland 2.355 2.168 2.159 9 0
USD USA 8.204 9.064 8.395 –9 8
Income statementIn 2017 the average exchange rate of the SEK against the Group’s other curren-
cies strengthened against GBP and weakened against the currencies CZK, DKK,
EUR, NOK, PLN and USD. The stronger SEK against GBP had a negative effect on
revenue in the amount of SEK –1.1 billion. The total exchange rate effect on the
Group’s revenue was SEK –198 M (–1,728), equivalent to –0.1 percent (–1.1). The
total exchange rate effect on the Group’s operating income was SEK –33 M (6),
equivalent to –0.5 percent (0.1). See the table below.
.
Exchange rate effect by currency
2017 USD EUR GBP NOK CZK PLN Other Total
Revenue –74 189 –1,113 196 235 370 –1 –198
Operating income 0 13 –12 8 4 –44 –2 –33
Income after financial items 0 12 –13 9 4 –44 –1 –33
Profit for the year 0 10 –11 7 0 –48 –1 –43
2016 USD EUR GBP NOK CZK PLN Other Total
Revenue 846 111 –2,183 –353 115 –258 –6 –1,728
Operating income 31 6 –38 –14 5 10 6 6
Income after financial items 25 5 –37 –16 5 10 6 –2
Profit for the year 15 5 –26 –12 4 10 6 2
Skanska Annual Report 2017154 Notes, including accounting and valuation principles
Note 34. Continued
Consolidated statement of financial position by currencyConsolidated total assets increased by SEK 2.9 billion, from SEK 106.5 billion to SEK 109.4 billion. Changes in foreign exchange rates had a negative impact of SEK –3.0 billion.
The closing exchange rate of the Swedish krona appreciated against GBP, NOK and USD.
Dec 31, 2017, SEK billion USD GBP EUR NOK CZK PLN DKK
Other foreign curren-
cies 1
Hedge loans 2 SEK Total
Assets
Property, plant and equipment 2.3 0.2 0.4 1.1 0.5 0.2 0.0 0.1 2.1 6.9
Intangible assets 1.0 1.5 0.5 1.3 0.5 0.0 0.0 0.1 0.6 5.5
Shares and participations 1.8 0.0 0.1 0.2 0.1 0.0 0.0 –0.2 1.3 3.3
Interest-bearing receivables 21.1 3.4 2.2 3.8 1.1 2.1 0.0 –26.8 –0.4 2.3 8.8
Current-asset properties 7.4 0.3 11.1 3.4 1.7 0.9 1.5 0.0 12.7 39.0
Non-interest-bearing receivables 17.3 4.9 2.5 4.0 1.2 2.1 0.0 0.4 6.5 38.9
Cash and cash equivalents 1.1 0.0 0.1 0.1 0.7 0.1 0.1 0.1 4.7 7.0
Total 52.0 10.3 16.9 13.9 5.8 5.4 1.6 –26.3 –0.4 30.2 109.4
Equity and liabilities
Equity attributable to equity holders 3 8.9 1.7 6.9 4.1 2.5 0.6 0.5 0.1 –4.8 6.6 27.1
Non-controlling interests 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.1
Interest-bearing liabilities 17.1 2.4 4.7 2.7 0.6 1.1 0.7 –26.8 4.4 10.0 16.9
Non-interest-bearing liabilities 26.0 6.2 5.3 7.1 2.6 3.7 0.4 0.4 13.6 65.3
Total 52.0 10.3 16.9 13.9 5.8 5.4 1.6 –26.3 –0.4 30.2 109.4
Dec 31, 2016, SEK billion USD GBP EUR NOK CZK PLN DKK
Other foreign curren-
cies 1
Hedge loans 2 SEK Total
Assets
Property, plant and equipment 2.5 0.2 0.4 1.0 0.5 0.4 0.0 –0.1 1.9 6.8
Intangible assets 1.5 1.6 0.5 1.4 0.5 0.1 0.0 0.1 0.6 6.3
Shares and participations 2.3 0.0 0.4 0.3 0.1 0.0 0.0 –0.1 1.2 4.2
Interest-bearing receivables 20.1 3.0 1.8 4.1 1.9 2.3 0.1 –24.0 -2.6 4.2 10.9
Current-asset properties 4.9 0.9 9.4 2.8 1.0 0.7 0.8 0.0 13.2 33.7
Non-interest-bearing receivables 16.0 6.6 2.3 3.9 1.1 2.6 0.0 0.3 6.4 39.2
Cash and cash equivalents 0.6 0.0 0.3 0.0 0.1 0.0 0.0 0.3 4.1 5.4
Total 47.9 12.3 15.1 13.5 5.2 6.1 0.9 –23.5 –2.6 31.6 106.5
Equity and liabilities
Equity attributable to equity holders 3 11.7 3.6 5.8 3.7 2.6 1.7 0.5 0.0 –5.4 3.2 27.4
Non-controlling interests 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.1 0.0 0.2
Interest-bearing liabilities 10.1 3.2 4.5 2.5 0.1 0.8 0.1 –24.0 2.8 15.0 15.1
Non-interest-bearing liabilities 26.1 5.5 4.8 7.3 2.4 3.6 0.3 0.4 13.4 63.8
Total 47.9 12.3 15.1 13.5 5.2 6.1 0.9 –23.5 –2.6 31.6 106.5
1 Including elimination of intra-Group receivables and liabilities.2 Amounts refer to hedges before tax deduction. Net investments abroad are currency-hedged to a certain extent through foreign currency loans and currency forward contracts – see also Note
6. Hedging of net investments through foreign currency loans in EUR and GBP amounts to 4.4 billion (2.8). Hedging of net investments through currency forward contracts amounts to SEK 0.4 billion (2.6), which breaks down as USD 0.2 (0.1), EUR 0.0 (0.3) and GBP 0.2 (2.2).
3 The respective currencies are calculated including goodwill on consolidation and the net amount of Group surpluses after deducting deferred taxes.
Effect on the Group of a change in SEK against other currencies and change in USD against SEKThe following sensitivity analysis, based on the 2017 income statement and
statement of financial position, shows the sensitivity of the Group to a unilateral
10 percent change in SEK against all currencies, as well as a unilateral 10 percent
change in USD against SEK (+ indicates a weakening of the Swedish krona, – indi-
cates a strengthening of the Swedish krona).
SEK bn +/– 10%Of which USD
+/– 10%
Revenue +/– 12.2 +/– 6.2
Operating income +/– 0.0 +/– 0.0
Equity +/– 2.2 +/– 0.9
Net receivables/net liabilities +/– 0.2 +/– 0.5
Other itemsFor information on the change in the translation reserve in equity, see Note 26
Equity/earnings per share.
Skanska Annual Report 2017 155Notes, including accounting and valuation principles
Note 35. Cash flow statement
Aside from the cash flow statement prepared in compliance with IAS 7 Statement
of Cash Flows, Skanska prepares a cash flow statement based on the operations
carried out by the respective business streams. This cash flow statement is called
the “Consolidated operating cash flow statement.” The connection between the
respective cash flow statements is explained below.
Adjustments for items not included in cash flow
2017 2016
Depreciation/amortization and impairment losses/reversals of impairment losses 2,462 1,973
Income from divestments of non-current assets and current-asset properties –5,323 –4,936
Income after financial items from joint ventures and associated companies –388 –728
Dividends from joint ventures and associated companies 256 358
Provision for the year, intra-Group profits on contracting work 452 207
Pensions recognized as expenses but not related to payments 710 600
Pensions paid –590 –566
Cost of Seop 297 272
Gain on joint ventures divested –1,362 –1,774
Other items that have not affected cash flow from operating activities –35 –324
Total –3,521 –4,918
Taxes paidTaxes paid are divided into operating activities, investing activities and financing
activities.
Total taxes paid for the Group during the year amounted to SEK –968 M
(–1,205).
Information about interest and dividends
2017 2016
Interest income received during the year 87 69
Interest payments made during the year –237 –243
Dividend received during the year 287 389
Cash and cash equivalentsCash and cash equivalents in the cash flow statement consist of cash and bank
balances as well as short-term investments. The definition of cash and bank bal-
ances in the statement of financial position can be found in Note 1 Accounting
and valuation principles.
The same rule that has been used in determining cash and cash equivalents in
the statement of financial position has been used in determining cash and cash
equivalents according to the cash flow statement. Only amounts that can be used
without restrictions are recognized as cash and bank balances.
2017 2016
Cash and bank balances 6,998 5,430
Total 6,998 5,430
Other itemsAt year-end, the Group’s unutilized credit facilities amounted to SEK 8,281 M
(5,713).
Information about assets and liabilities in divested Group companies/businesses
2017 2016
Assets
Intangible assets –67
Property, plant and equipment –39
Shares and participations –22
Interest-bearing assets –689
Non-interest-bearing assets –698
Total 0 –1,515
Liabilities
Interest-bearing liabilities –26
Non-interest-bearing liabilities –905
Total 0 –931
Consideration 961
Cash and cash equivalents in divested companies –99
Effect on cash and cash equivalents, divestment 0 862
No Group companies were divested in 2017. Group companies divested in 2016
provided a profit of SEK 268 M. This is recognized under costs of production and
management. In 2016 the divestments constituted 100 percent of the holdings in
the respective Group companies.
Relation between consolidated operating cash flow statement and consolidated cash flow statementThe difference between the consolidated operating cash flow statement and the
consolidated cash flow statement in compliance with IAS 7
Statement of Cash Flows is presented below.
The consolidated cash flow statement prepared in compliance with IAS 7 recog-
nizes cash flow divided into:
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
The consolidated operating cash flow statement recognizes cash flow divided
into:
Cash flow from business operations
Cash flow from financing activities
Cash flow from strategic investments
Dividend etc.
Change in interest-bearing receivables and liabilities
The consolidated operating cash flow statement refers to operating activities as
“business operations.” Unlike the cash flow statement in compliance with IAS 7,
“business operations” also includes net investments, which are regarded as an
element of business operations together with tax payments on these. Such net
investments are net investments in property, plant and equipment and intangible
non-current assets as well as net investments in Infrastructure Development.
Investments of a strategic nature are recognized under cash flow from strategic
investments.
Under cash flow from financing activities, the operating cash flow statement
recognizes only interest and other financial items as well as taxes paid on these.
Dividends are recognized separately. Loans provided and repayment of loans are
also recognized separately along with changes in interest-bearing receivables at
the bottom of the operating cash flow statement, resulting in a subtotal in that
statement that shows cash flow before changes in interest-bearing receivables
and liabilities.
Skanska Annual Report 2017156 Notes, including accounting and valuation principles
Cash flow for the year
2017 2016
Cash flow from business operations including taxes paid according to operating cash flow 2,702 –1,078
Less net investments in property, plant and equipment and intangible assets 112 160
Less tax payments on property, plant and equip-ment and intangible assets divested and divest-ment of assets in Infrastructure Development 32 35
Cash flow from operating activities 2,846 –883
Cash flow from strategic investments according to operating cash flow 0 862
Net investments in property, plant and equip-ment and intangible assets –112 –160
Increase and decrease in interest-bearing receivables 1,734 –2,260
Taxes paid on property, plant and equipment and intangible assets divested and assets in Infrastruc-ture Development –32 –35
Cash flow from investing activities 1,590 –1,593
Cash flow from financing activities according to operating cash flow statement, including changes in interest-bearing receivables and liabilities 2,796 –2,476
Increase and decrease in interest-bearing liabilities –1,734 2,260
Dividend etc. 1 –3,879 –3,874
Cash flow from financing activities –2,817 –4,090
Cash flow for the year 1,619 –6,566
1 Of which repurchases of shares –440 –793
Relation between the Group’s investments in the cash flow statement and investments in the operating cash flow statementTotal net investments are recognized in the cash flow statement divided into
operating activities and investing activities, taking into account the settlement of
payments for investments and divestments.
Purchases and sales of current-asset properties are recognized under operating
activities, while other net investments are recognized under investing activities.
2017 2016
Net investments in operating activities –1,217 –655
Net investments in investing activities –112 702
–1,329 47
Less accrual adjustments, cash flow effect of investments 243 96
Total net investments –1,086 143
The consolidated operating cash flow statement recognizes net investments divided into net investments in operations and strategic net investments as fol-lows.
Investments/divestments
2017 2016
Operations – investments
Intangible assets –255 –394
Property, plant and equipment –1,876 –1,636
Assets in Infrastructure Development –449 –1,336
Shares –154 –325
Current-asset properties –21,451 –17,108
of which Residential Development –10,801 –9,005
of which Commercial Property Development –10,650 –8,103
–24,185 –20,799
Operations – divestments
Intangible assets 1 2
Property, plant and equipment 213 411
Assets in Infrastructure Development 1,950 3,102
Shares 458 16
Current-asset properties 20,477 16,549
of which Residential Development 11,767 7,508
of which Commercial Property Development 8,710 9,041
23,099 20,080
Net investments in operations –1,086 –719
Strategic divestments
Divestments of businesses 0 862
Net strategic investments 0 862
Total net investments –1,086 143
The change in interest-bearing liabilities belonging to financing activities is pre-
sented in the following table.
Interest-bearing liabilities
2017 2016
January 1 10,172 10,184
Items affecting cash flow from financing activities 885 –140
Exchange rate differences 266 128
December 31 11,323 10,172
Note 35.Continued
Skanska Annual Report 2017 157Notes, including accounting and valuation principles
Note 36. Personnel
Wages, salaries, other remuneration and social insurance contributions
2017 2016
Wages, salaries and other remuneration
Board members, Presidents, Executive Vice Presidents and other executive team members 1 554 588
of which variable remuneration 213 223
Other employees 21,448 21,190
Total wages, salary and other remuneration 22,002 21,778
Social insurance contributions 5,415 5,531
of which pension expenses 2,130 2,144
1 The amount related to Board members, Presidents, Executive Vice Presidents and other executive team members includes remuneration to former Board members, Presidents and Executive Vice Presidents in all Group companies during the financial year.
Of the Group’s total pension expenses, SEK 49 M (52) relates to Board members,
Presidents, Executive Vice Presidents and other executive team members.
The amount includes remuneration to former Board members, Presidents and
Executive Vice Presidents.
Average number of employeesPersonnel is calculated as the average number of employees. See Note 1 Account-
ing and valuation principles
2017of whom
men %of whom
women % 2016of whom
men %of whom
women %
Sweden 9,304 7,500 81 1,804 19 10,158 8,476 83 1,682 17
Norway 3,867 3,472 90 395 10 3,864 3,482 90 382 10
Denmark 15 10 67 5 33 18 11 61 7 39
Finland 2,091 1,740 83 351 17 2,056 1,760 86 296 14
UK 5,813 4,586 79 1,227 21 5,617 4,387 78 1,230 22
Poland 5,598 4,378 78 1,220 22 6,892 5,396 78 1,496 22
Czech Republic 3,039 2,528 83 511 17 3,141 2,626 84 515 16
Slovakia 838 718 86 120 14 790 656 83 134 17
USA 9,350 7,975 85 1,375 15 9,276 7,941 86 1,335 14
Other countries 844 775 92 69 8 1,091 1,023 94 68 6
Total 40,759 33,682 83 7,077 17 42,903 35,758 83 7,145 17
The number of employees as of December 31, 2017 was 40,400 (40,642).
Men and women on Boards of Directors and in executive teams on closing day
2017of whom
men of whom
women 2016of whom
men of whom
women
Number of Board members 193 84% 16% 206 86% 14%
Number of Presidents and members of executive teams in Business Units 191 77% 23% 189 80% 20%
Other itemsNo loans, assets pledged or contingent liabilities have been provided for the
benefit of any Board member or President within the Group.
Skanska Annual Report 2017158 Notes, including accounting and valuation principles
Note 37. Remuneration to senior executives and Board members
The Senior Executive Team consisted of the President and CEO and the eight
Executive Vice Presidents. Of these nine individuals at the end of 2017, three were
women and six were men.
Senior executives are defined as the members of the Senior Executive Team.
Preparation and decision-making processes Principles for senior executive remuneration are established annually by the An-
nual General Meeting. Salary and other benefits for the President and CEO are
established by the Board of Directors of Skanska AB following recommendations
from the Board’s Compensation Committee. The Committee sets salaries, variable
remuneration and other benefits for the senior executives. The President and CEO
regularly informs the Compensation Committee about the salaries, variable remu-
neration and other benefits of the heads of Group Staff Units and Business Units.
In 2017 the Compensation Committee consisted of Hans Biörck, Chairman of the
Board, and Board members Pär Boman, Jayne McGivern and John Carrig. The
Compensation Committee met seven times during the year. The Annual General
Meeting approves the directors’ fees and remuneration for committee work for
members of the Board, following recommendations from the Nomination Com-
mittee.
Senior executive remunerationPrinciples for remuneration The 2017 Annual General Meeting approved the following guidelines for salaries
and other remuneration for senior executives:
Remuneration for senior executives of Skanska AB is to consist of a fixed salary,
possible variable remuneration, other customary benefits and pension. The senior
executives include the President and CEO and the other members of the Senior
Executive Team.
The combined remuneration for each executive must be market-based and
competitive in the job market in which the executive works, and outstanding
performance should be reflected in the total remuneration package.
Fixed salary and variable remuneration are to be linked to the level of respon-
sibility and authority of the senior executive. The variable remuneration is to be
payable in cash and/or shares, and it is to have a ceiling and be related to the fixed
salary. To receive shares a three-year vesting period is required and the shares are
to be part of a long-term incentive program. Variable remuneration is to be based
on performance in relation to established targets and designed to achieve better
alignment between the interests of the executive and of the company’s share-
holders. The terms of variable remuneration should be designed in such a way
that if exceptional economic conditions exist, the Board has the ability to limit or
refrain from paying variable remuneration if such payment is deemed unreason-
able and incompatible with the company’s general responsibility to shareholders,
employees and other stakeholders. With respect to the annual bonus, the Board
has the possibility of limiting or refraining from paying this variable remuneration
if it deems such action reasonable for other reasons.
If a Board member performs work on behalf of the company in addition to his
or her Board duties, a consultant fee and other compensation for such work may
be payable.
In case of termination or resignation, the normal notice period is six months
combined with severance pay equivalent to a maximum of 18 months of fixed sal-
ary or, alternatively, a notice period of a maximum of 24 months.
Pension benefits are to be either defined-benefit or defined-contribution plans,
or a combination of both, and entitle the executive to receive an occupational
pension from the age of 65. In individual cases, however, the retirement age may
be as low as 60. To earn full defined-benefit pension, the individual is required
to have been employed for as long a period as is required under the company’s
general pension plan in each respective country. Variable remuneration is not
pensionable except in cases where this is stipulated in the rules for a general
pension plan (e.g. Sweden’s ITP occupational pension plan.)
The Board of Directors may deviate from these guidelines if there are special
reasons to do so in an individual case.
The President and CEO’s salary and other remuneration are reviewed by the
Compensation Committee in preparation for decisions by the Board. The salary
and other remuneration for other senior executives are determined by the
Compensation Committee.
Targets and performance relating to variable remuneration Variable remuneration may consist of two parts: annual variable salary, which is
cash based, and the share incentive program, which provides compensation in the
form of shares.
The long-term share programs are described in the sections under the headings
“Long-term share programs” and “Previous long-term share programs” in this
note. The table below presents, by business stream, the starting point and out-
perform targets that were decided by the Board for the 2017 cash-based variable
remuneration.
Financial targets for variable salary components 2017
Measure of earnings Starting Point Outperform OutcomePercentage
fulfilled 2
Group Income after financial items, SEK bn 1 4.9 7.1 5.7 33%
Construction Operating income, SEK bn 2.8 4.7 1.2 50%
Skanska Value Added, SEK bn 3 3.5 5.2 2.3 58%
Residential Development 4 Operating income, SEK bn 0.9 1.4 1.7 98%
Return on capital employed, % 8 12 18 100%
Commercial Property Development Operating income, SEK bn 1.2 1.9 2.7 98%
Return on capital employed, % 5 7 11 15 92%
Leasing, thousands of sq m 168 331 434 100%
Infrastructure Development Operating income, SEK bn 0.8 0.9 0.9 100%
Project development, % 6 0 100 63 63%
1 The income excludes eliminations at the Group level. The outperform target at the Group level constitutes 95 percent of the Business stream’s total outperform target and the starting point target constitutes 105 percent of the Business stream’s total starting point target.
2 Percentage fulfilled is based on the outcomes for the respective Business Units, which are weighed together. As the amount fulfilled per Business Unit must be at least 0 percent, negative earn-ings from the Business Units may affect the comparison with the Business stream’s total earnings.
3 The Skanska Value Added (SVA) target corresponds to operating income less cost of capital employed. Cost of capital refers to the estimated cost of borrowed capital and equity before tax.4 Residential Development in Central Europe as well as BoKlok are also measured according to the number of sold units. Rental properties are also measured according to the number of units
started.5 Including unrealized development gains and changes in market value. Encompasses the Commercial Property Development Business Units in the Nordics, Europe and USA.6 Includes targets for project development in Europe and USA as well as asset management and divestments.
Skanska Annual Report 2017 159Notes, including accounting and valuation principles
In addition to the financial performance targets, the senior executives have non-
financial targets that may reduce the outcome measured only according to the
financial targets. The non-financial targets mainly relate to strategic initiatives
linked to the business plan. The outcome is reduced in cases where the operations
for which the person is responsible have not reached the non-financial targets.
Annual variable remuneration for the senior executives, excluding the Presi-
dent and CEO, is mainly tied to the Group targets and/or to the Business Units
they are directly responsible for. The non-financial targets are connected to the
Business Units and/or operations for which the senior executives are responsible
for. The preliminary outcome for the other senior executives averaged
47 percent (83) of fixed annual salary. This calculation is preliminary insofar as any
deductions as a consequence of non-financial targets have not yet been taken
into account. The Board will determine the final outcome of variable remunera-
tion in the first quarter of 2018 after reviewing operational performance.
Targets and performance related to variable remuneration for the President and CEO The financial targets for the President and CEO were the same as the Group
targets according to the table below. The Board of Directors has the option of
reducing the final outcome of variable remuneration measured solely on the
financial targets by a maximum of 50 percent, based on the outcome of the
Group’s non-financial targets. The preliminary outcome for the President and
CEO’s variable remuneration (i.e., excluding the employee ownership program)
shows an outcome of 33 percent (100) of fixed salary, based on financial targets
with a target fulfillment of 33 percent (100). This calculation is preliminary insofar
as any deductions as a consequence of non-financial targets have not yet been
taken into account. The Board will determine the final outcome in the first quarter
of 2018 after reviewing operational performance.
Pension benefits The retirement age of the senior executives is 62 to 65 years. Employees in Swe-
den are entitled to pension benefits according to the ITP occupational pension
plan. The ITP plan encompasses the defined-contribution ITP 1 pension system
and the defined-benefit ITP 2 pension system. Employees outside Sweden are
covered by local pension plans. The ITP 1 contribution is 4.5 percent of gross cash
salary up to 7.5 base amounts of income per year and 30 percent of gross cash sal-
ary above that. The defined-benefit ITP 2 plan guarantees a lifetime pension from
age 55. The pension amount is a certain percentage of the employee’s final salary,
and the service period to qualify for a full pension is 30 years. The pension entitle-
ment is 10 percent for salary components up to 7.5 base amounts, 65 percent
for components between 7.5 and 20 base amounts and 32.5 percent for salary
components between 20 and 30 base amounts. For salary components exceeding
30 base amounts, this ITP 2 group is covered by a supplementary pension entitle-
ment, with a premium of 20 percent.
Severance pay The notice period for the senior executives, in the case of termination by the
company, is six months with retention of fixed salary and benefits, excluding vari-
able remuneration. After the notice period, severance pay is disbursed for 12 to 18
months. When payments are disbursed after the notice period other income must
normally be subtracted from the amount payable.
A mutual notice period of 24 months applies between Skanska and the President
and CEO, with retention of fixed salary and benefits, excluding variable remunera-
tion. No severance pay will be disbursed in the case of termination.
Remuneration and benefits recognized as expenses in 2017Directors’ fees The 2017 Annual General Meeting resolved that fees would be paid to the Board
members elected by the Meeting, with the exception of the President and CEO,
totaling SEK 9,715,000 (8,485,000), including a special allowance for committee
work. See the table below.
.
Chairman of the Board During the 2017 financial year the Chairman of the Board, Hans Biörck, received a
director’s fee totaling SEK 2,513,000, (2,445,000) of which SEK 473,000 (450,000)
was for committee work.
Board members In addition to regular directors’ fees and remuneration for committee work,
Board member John Carrig received a consulting fee of SEK 239,000. Other
members of the Board did not receive any remuneration for their role as Board
members beyond their regular directors’ fees and remuneration for committee
work.
Not 37. Continued
Board of Directors
SEK thousand Director’s fee
Audit Committee
Compensation Committee
Project Review Committee Total
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Chairman of the Board
Hans Biörck 2,040 1,995 158 150 110 100 205 200 2,513 2,445
Other Board members
John Carrig 680 665 158 150 105 100 205 200 1,148 1,115
Nina Linander 680 665 158 150 0 0 205 200 1,043 1,015
Fredrik Lundberg 680 665 0 0 0 0 205 200 885 865
Charlotte Strömberg 680 665 220 200 0 100 205 200 1,105 1,165
Pär Boman 680 665 158 150 105 0 205 200 1,148 1,015
Jayne McGivern 680 665 0 0 105 0 205 200 990 865
Catherine Marcus 680 – 0 – 0 – 205 – 885 –
Board of Directors 6,800 5,985 850 800 425 300 1,640 1,400 9,715 8,485
For Board members appointed by the employees, no disclosures are made
concerning salaries and remuneration or pensions as they do not receive these
in their capacity as Board members. For Board members who were employees
of the company before the beginning of the financial year, disclosures are made
concerning pension obligations in their former role as employees.
Skanska Annual Report 2017160 Notes, including accounting and valuation principles
Senior executives
SEK thousand Annual salary Variable remuneration 1
Allocated value of employee ownership
programs 2
Other remuneration and benefits 3 Pension expense Total
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
President and CEO
Johan Karlström 12,670 12,360 4,243 12,360 1,988 8,645 84 73 6,335 6,180 25,320 39,618
Other senior execu-tives (8 individuals) 4 40,854 39,779 15,216 28,792 5,408 27,440 42,914 1,172 17,018 13,250 121,409 110,432
Total 53,524 52,139 19,459 41,152 7,396 36,085 42,998 1,245 23,353 19,430 146,729 150,050
1 Variable remuneration relating to the 2017 financial year is preliminary and will be finally determined and disbursed after the outcome is established in the first quarter of 2018. The amounts included under the heading “Variable remuneration” in the table above refer to the 2017 financial year. The variable remuneration agreements include a general clause stipulating that the Board of Directors and the Compensation Committee are entitled to wholly or partly reduce variable remuneration.
2 The value stated refers to a preliminary allotment of matching shares and performance shares for 2017, at the share price on December 29, 2017 (SEK 170). The senior executives will receive an estimated 6,445 (6,990) matching shares and 37,062 (160,768) performance shares. The Board will determine the final outcome in the first quarter of 2018 after reviewing operational perfor-mance. In order to receive matching shares and performance shares, an additional three years of service are required. The total cost has not yet been expensed as the cost is allocated over three years in accordance with IFRS 2. See the section under the heading “Long-term share programs.” The President and CEO as well as some other senior executives received remuneration related to the 2014 financial year. After a three-year lock-up period as part of the previous employee ownership program, Seop 3, the President and CEO received 38,860 (35,302) shares, equivalent to SEK 6,606,000 (7,594,000) in 2017, for shares acquired for the financial year 2014. In 2017, as part of Seop 3, the other senior executives, after a three-year lock-up period, received 80,403 (86,998) Series B Skanska shares, equivalent to SEK 13,669,000 (18,713,000), for shares allotted for the 2014 financial year.
3 The amount includes the cost of salaries during the notice period and severance pay for five individuals who left the company in 2017 and 2018. These costs are charged to the accounts in 2017 but the amounts will be disbursed in 2018–2020.
4 During the period January 16 – March 31 this group consisted of nine individuals.
President and CEO In 2017 the President and CEO, Johan Karlström, received a fixed salary of
SEK 12,670,000 (12,360,000) plus an estimated variable salary component of
SEK 4,243,000 (12,360,000) based on financial targets being 33 percent fulfilled.
Variable remuneration is maximized at 100 percent (100) of fixed annual salary.
The final outcome of variable remuneration for the President and CEO will be
established by the Board in the first quarter of 2018 following a review of opera-
tional performance. The preliminary outcome was equivalent to 33 percent (100)
of fixed annual salary. Disbursement normally occurs in May of the year following
the performance year.
The President and CEO is also participating in the Group’s ongoing employee
ownership program, Seop 4, which involves an allocation of matching shares
and performance shares. See the section under the heading “Long-term share
programs” in this note. Within the framework of Seop 4, Johan Karlström
acquired 6,931 (6,698) Series B Skanska shares, which is expected to result in the
allocation of 1,733 (1,675) matching shares equivalent to SEK 295,000 (360,000).
An estimated 9,964 (38,515) performance shares are expected to be allocated, for
a value of SEK 1,694,000 (8,285,000), since the outperform targets were prelimi-
narily 25 percent (100) fulfilled. The amount stated is based on the share price on
December 29, 2017 (SEK 170). The allocation of performance shares will be finally
determined in the first quarter of 2018 after reviewing operational performance.
Annual pension provisions will total 50 percent of fixed annual salary. The cost
in 2017 amounted to SEK 6,335,000 (6,180,000). Johan Karlström left his position
as CEO and member of the Senior Executive Team on December 31, 2017. He will
continue to serve as a senior advisor until January 31, 2019.
Other senior executives In 2017 one individual joined and one individual left the Senior Executive Team. At
the end of 2017 the other senior executives consisted of eight individuals.
The senior executives received a fixed salary and variable remuneration based
on the Group’s earnings and/or the earnings of the Business Units for which they
are directly responsible. In addition, the senior executives were covered by the
Group’s ongoing employee ownership program, Seop 4, involving an allocation
of matching shares and performance shares. See the section under the heading
“Long-term share programs” in this note. A total of 18,851 (21,261) Series B
Skanska shares were purchased by the senior executives in 2017 under the Seop
4 program, which resulted in 4,713 (5,315) matching shares, equivalent to SEK
801,000 (1,143,000). An estimated 27,098 (122,252) performance shares may be
allocated, at a value of SEK 4,607,000 (29,296,000), since the outperform targets
were preliminarily 25 percent (100) fulfilled. The amount stated is based on the
share price on December 29, 2017 (SEK 170). Variable remuneration and the out-
come of performance shares for 2017 are preliminary. The final outcome will be
established in the first quarter of 2018 after a review of operational performance.
Disbursement of the cash-based variable remuneration normally occurs in May of
the year following the performance year.
All above-mentioned remuneration and benefits were charged to Skanska AB,
except for SEK 10,739,000 (31,157,000) to senior executives, which was charged
to other Group companies.
Pension obligations to current and former senior executivesIn 2017, outstanding pension obligations to Presidents and CEOs, including
former Presidents and CEOs, amounted to SEK 151,393,000 (149,947,000). Out-
standing obligations to other current and former senior executives amounted to
SEK 109,782,000 (112,085,000).
Long-term share programsShare incentive program – Skanska employee ownership program, Seop 4 (2017–2019)In 2016 the Annual General Meeting approved the introduction of the Seop 4
long-term employee ownership program for employees of the Group. This is es-
sentially an extension of the earlier Seop 3 employee ownership program that ran
from 2014–2016. The terms and conditions are the same in all material respects as
those of the earlier Seop 3 program.
The program is aimed at about 40,000 permanent employees of the Skanska
Group, of whom some 2,000 are key employees and about 300 are executives,
including the President and CEO and other senior executives.
The program offers employees, key employees and executives the opportunity
– provided they have made their own investment in Series B Skanska shares during
a given financial year – to receive Series B Skanska shares from Skanska free of
charge. For each four Series B investment shares purchased, the employee will be
entitled, after a three-year lock-up period, to receive one Series B Skanska share
free of charge. In addition, after the lock-up period, the employee will be able
to receive additional Series B Skanska shares free of charge contingent upon the
fulfillment of certain earnings-based performance criteria during the purchase
period.
The purchase period covers the years 2017–2019 and the lock-up period runs
for three years from the month in which the investment shares are acquired.
For each four investment shares purchased, employees may, in addition to one
matching share, receive a maximum of three performance shares. For each four
investment shares, key employees may, in addition to one matching share, receive
a maximum of seven performance shares. For each four investment shares,
executives (split into three subcategories) may, in addition to one matching
share, receive a maximum of 15, 19 or 23 performance shares respectively. The
maximum number of investment shares that each employee participating in the
program may acquire, through monthly saving, depends on the employee’s salary
and whether the employee is participating in the program as an employee, a key
employee or an executive.
Not 37. Continued
Skanska Annual Report 2017 161Notes, including accounting and valuation principles
To qualify to receive matching and performance shares, a participant must be em-
ployed within the Group throughout the vesting period and must have retained
his or her investment shares during this lock-up period.
The program has two cost ceilings. The first ceiling depends on the extent to
which financial Seop-specific outperform targets are met, which limits Skanska’s
total cost per year to SEK 208–655 M, related to fulfillment of the financial Seop-
specific outperform targets at the Group level. The first cost ceiling is adjusted
in accordance with the Consumer Price Index, with 2016 as the base year for
Seop 4. The other cost ceiling is that Skanska’s total cost per year may not exceed
15 percent of earnings before interest and taxes (EBIT) at the Group level. The
actual cost ceiling will be the lower of these two cost ceilings. The cost for the
outcomes of stock purchase programs from previous years is included in annually
established performance targets. In addition to the cost ceilings, the number of
shares that may be repurchased as part of the three-year program is also limited
to 13,500,000 shares. A preliminary assessment of the outcome for 2017 indicates
that the first cost ceiling was exceeded, which means that the allotment level
will be preliminarily reduced proportionately for the program participants. The
outcome is finally established by the Board after reviewing the business in the first
quarter of 2018.
The table above shows Seop 4 target fulfillment in 2017 for each business
stream.
In the Skanska Group, a total of 32 percent (30) of permanent employees
participated in Seop 4 in 2017.
Excluding social insurance contributions, the cost of Seop 4 is estimated at
around SEK 311 M, of which the cost for 2017 amounts to around SEK 63 M. The
remaining cost of Seop 4 up to and including 2022 is estimated at about SEK 248 M.
The dilution effect through 2017 of Seop 4 for the 2017 program is estimated
at 287,989 shares or 0.07 percent of the number of Series B Skanska shares out-
standing. Maximum dilution for the program in 2017 is expected to be 1,473,955
shares or 0.36 percent.
The number of issued shares will not change; instead the matching and per-
formance shares will be allocated from repurchased shares. Repurchasing will be
evenly distributed over time. There will therefore be essentially no dilution effect.
Previous long-term share programsShare incentive program – Skanska employee ownership program, Seop 3 (2014–2016) Shares for the previous Skanska employee ownership program, which ran from
2014 to 2016, were distributed in 2017. These were shares that were earned in
2014, which, after a three-year lock-up period, were distributed to those who
had been employed by the Group throughout the lock-up period and who had
retained their investment shares during this lock-up period.
Excluding social insurance contributions, the cost of Seop 3 totaled SEK 862 M,
of which SEK 420 M was expensed in 2014–2016, while the cost for 2017 amounts
to around SEK 234 M. The remaining cost of Seop 3 up to and including 2019 is
estimated at about SEK 208 M.
The dilution effect through 2017 for Seop 3 is estimated at 2,146,781 shares or
0.52 percent of the number of Series B Skanska shares outstanding. The maximum
dilution for the program at the end of the vesting period in 2019 is expected to be
3,253,711 shares or 0.79 percent.
Local incentive programs Salaries and other remuneration are established taking into account conditions
prevailing in the rest of the construction industry and customary practices in each
local market. The Skanska Group applies a remuneration model for the relevant
executives and managers that consists of a fixed annual salary plus variable remu-
neration based on financial targets reached.
Financial targets for the employee ownership program, Seop 4, 2017 1
Measure of earnings Starting Point Outperform Outcome Percentage fulfilled 2
Group Earnings per share, SEK 3 11.3 14.2 12.0 25%
Construction Operating income, SEK bn 3.0 4.8 1.2 45%
Residential Development 4 Operating income, SEK bn 1.1 1.5 1.7 98%
Commercial Property Development Operating income, SEK bn 1.4 1.9 2.7 97%
Leasing, thousands of sq m 161 323 427 100%
Infrastructure Development Operating income, SEK bn 0.8 0.9 0.9 100%
Project development, % 0 100 63 63%
1 For further information, see the table “Financial targets for variable salary components” in Note 37 on page 158. 2 Percentage fulfilled is based on outcomes in the respective Business Units, which are weighed together. 3 Profit for the period attributable to equity holders, divided by the average number of outstanding shares during the year.4 The units for housing development in Central Europe as well as BoKlok are also measured on return on capital employed. Rental properties are also measured according to the number of units
started.
Not 37. Continued
Skanska Annual Report 2017162 Notes, including accounting and valuation principles
Not 38. Fees and other remuneration to auditors
Ernst & Young KPMG
2017 2016 2017 2016
Audit assignments 49 46 8
Audit work in ad-dition to the audit assignment 5 0
Tax advisory services 1 3 1
Other services 3 1 2
Total 58 50 0 11
In 2017 Ernst & Young’s audit assignment was for the first time done solely by
Ernst & Young for the whole Group, as the audit of Skanska Sweden for the com-
parison year 2016 was conducted jointly with KPMG.
For the Parent Company, fees for audit assignments during the year amounted
to SEK 6 M.
“Audit assignments” refers to the statutory audit of the annual accounts
and accounting documents as well as the administration of the company by the
Board of Directors and the President and CEO, along with audit and other review
work conducted according to agreements or contracts. This includes other tasks
that are incumbent upon the company’s auditors as well as advisory services or
other assistance as a result of observations made during such review work or the
completion of such other tasks.
“Other services” refers to advisory services related to accounting issues,
advisory services concerning the divestment and acquisition of businesses and
advisory services relating to processes and internal control.
Not 39. Related party disclosures
Joint ventures and associated companies are companies related to Skanska. Infor-
mation on transactions with these is presented in the following tables.
Information on remuneration and transactions with senior executives is found
in Note 36 Personnel, and Note 37 Remuneration to senior executives and Board
members.
Transactions with joint ventures 2017 2016
Sales to joint ventures 9,454 7,310
Purchases from joint ventures 38 57
Dividends from joint ventures 256 358
Receivables from joint ventures 184 532
Liabilities to joint ventures 0 10
Contingent liabilities for joint ventures 814 1,379
Transactions with associated companies 2017 2016
Purchases from associated companies 0 0
Receivables from associated companies 0 0
Liabilities to associated companies 15 0
L E Lundbergföretagen AB group has assigned Skanska to undertake four
construction contracts for a total order backlog of SEK 246 M (465). Sales in 2017
amounted to SEK 236 M (91) and order bookings were SEK 17 M (0).
Skanska’s pension fund directly owns 370,000 (370,000) Series B shares in
Skanska. There is also an insignificant percentage of indirectly owned shares via
investments in various mutual funds.
No transactions took place between Skanska’s pension funds and the company
in 2017, other than Skanska receiving recompense from the pension funds and
charging for other services performed by Skanska.
.
Skanska Annual Report 2017 163Notes, including accounting and valuation principles
Not 40. Leasing
Skanska is a lessee in both finance and operating leases.
When Skanska is a lessee, finance lease assets are recognized as a non-current
asset in the statement of financial position, while the future obligation to the
lessor is recognized as a liability in the statement of financial position.
Skanska is not a financial lessor.
As an operating lessor, Skanska leases properties to tenants mainly via its
Commercial Property Development business stream.
A. Skanska as a lesseeFinance leasesLeased property, plant and equipment including buildings and land (“Property”)
as well as machinery and equipment (“Plant and equipment”) are recognized in
the consolidated financial statements as finance leases.
Of the amount in the statement of financial position for finance leases, most
relates to car leases in Sweden.
Agreements with lease companies in other countries are operating leases.
Financial leases, carrying amount 2017 2016
Property, plant and equipment
Property (buildings and land) 0 0
Plant and equipment 274 266
Total 274 266
Acquisition cost 1,215 1,098
Depreciation for the year –88 –80
Accumulated depreciation, January 1 –853 –752
Carrying amount 274 266
Variable fees for finance leases included in 2017 income amounted to SEK 0 M (0).
No property leased to Skanska has been subleased to others.
Future minimum lease payments and their present value are presented in the
following table.
Futureminimum lease
payments
Present value of future minimum lease
payments
Expenses, due date 2017 2016 2017 2016
Within one year –65 –50 –52 –38
Later than one year but within five years –209 –196 –163 –152
Later than five years 0 0 0 0
Total –274 –246 –215 –190
Reconciliation, future minimum lease payments and their present value
Future minimum lease payments –274 –246
Less interest charges 59 56
Present value of future minimum lease payments –215 –190
Operating leasesMost of the amounts for future minimum lease payments are related to leased
cars and office space in Sweden, the UK, Poland and USA. Also included are site
leasehold agreements for land.
The Group’s lease expenses related to operating leases in 2017 totaled
SEK –994 M (–638), of which SEK –967 M (–615) relates to minimum lease pay-
ments and SEK –27 M (–23) to variable payments.
The Group had SEK 12 M (13) in lease income related to subleasing of operating
leases.
The due dates of future minimum lease payments for non-cancellable operat-
ing leases break down as follows:
Expenses, due date 2017 2016
Within one year –1,183 –532
Later than one year but within five years –2,626 –1,256
Later than five years –2,168 –2,119
Total –5,977 –3,907
Of this amount, SEK 34 M (53) relates to properties that were subleased.
B. Skanska as lessorFinance leasesSkanska is not a financial lessor.
Operating leasesOperating leases in the form of property leases are mainly entered into by the
Commercial Property Development business stream. These properties are
recognized as current assets in the statement of financial position. See Note 4
Operating segments.
Lease income for Commercial Property Development in 2017 amounted
to SEK 510 M (571).
The Group’s variable lease income related to operating leases amounted
to SEK 88 M (139) during the year.
The due dates of future minimum lease payments for non-cancellable
operating leases break down as follows:
Revenue, due date 2017 2016
Within one year 171 425
Later than one year but within five years 2,040 632
Later than five years 3,748 674
Total 5,959 1,731
The carrying amount for current-asset properties in Commercial Property Devel-
opment was SEK 23,615 M (19,728).
Not 41. Events after the reporting period
The Board of Directors for Skanska AB decided in January 2018 to restructure
operations in several market outside the Nordic region, and also to review Group
governance. The cost of these measures will be taken in 2018 and is expected to
be around SEK 600 million. The main cost will be termination of employment for
around 3,000 employees, most of them in Poland.
Skanska Annual Report 2017164 Notes, including accounting and valuation principles
Note 42.Five-year Group financial summary
Income statements, in compliance with IFRS
2017 2016 2015 2014 2013
Revenue 157,877 145,365 153,049 143,325 136,589
Cost of sales –145,103 –131,119 –139,160 –130,215 –124,161
Gross income 12,774 14,246 13,889 13,110 12,428
Selling and administrative expenses –9,851 –9,152 –8,869 –8,370 –7,681
Income from joint ventures and associated companies 1,655 2,126 1,270 669 813
Operating income 4,578 7,220 6,290 5,409 5,560
Financial items 45 –119 –314 –280 –241
Income after financial items 4,623 7,101 5,976 5,129 5,319
Taxes –512 –1,366 –1,185 –1,279 –1,551
Profit for the year 4,111 5,735 4,791 3,850 3,768
Profit for the year attributable to
Equity holders 4,095 5,722 4,780 3,843 3,765
Non-controlling interests 16 13 11 7 3
Other comprehensive income
Items that will not be reclassified to profit or loss for the period
Remeasurement of defined-benefit pension plans –399 –1,127 785 –2,299 723
Tax related to items that will not be reclassified to profit or loss for the period 69 189 –175 509 –183
–330 –938 610 –1,790 540
Items that have been or will be reclassified to profit or loss for the period
Translation differences attributable to equity holders –599 1,165 71 1,817 –560
Translation differences attributable to non-controlling interests 8 8 –3 6 –9
Hedging of exchange rate risk in foreign operations –125 36 –21 –325 201
Effects of cash flow hedges 138 31 54 –75 –87
Tax related to items that have been or will be reclassified to profit or loss for the period 83 855 281 –748 613
Tax related to items that have been or will be reclassified to profit for the period –25 –4 –15 23 17
–520 2,091 367 698 175
Other comprehensive income after tax –850 1,153 977 –1,092 715
Comprehensive income for the year 3,261 6,888 5,768 2,758 4,483
Comprehensive income for the year attributable to
Equity holders 3,237 6,867 5,760 2,745 4,489
Non-controlling interests 24 21 8 13 –6
Cash flow
Cash flow from operating activities 2,846 –883 8,584 4,756 6,252
Cash flow from investing activities 1,590 –1,593 –1,385 238 –1,447
Cash flow from financing activities –2,817 –4,090 –4,544 –3,615 –3,238
Cash flow for the year 1,619 –6,566 2,655 1,379 1,567
Skanska Annual Report 2017 165Notes, including accounting and valuation principles
Income statement, in compliance with Segment Reporting
2017 2016 2015 2014 2013
Revenue
Construction 150,050 138,001 140,648 128,663 118,976
Residential Development 13,237 13,264 12,298 9,558 9,234
Commercial Property Development 11,440 10,226 9,034 10,228 6,206
Infrastructure Development 81 237 106 163 87
Central and eliminations –13,985 –10,421 –7,151 –3,583 1,943
Group 160,823 151,307 154,935 145,029 136,446
Operating income
Construction 1,205 3,546 3,874 4,508 3,880
Residential Development 1,716 1,605 1,174 683 573
Commercial Property Development 2,714 2,336 1,947 1,700 1,068
Infrastructure Development 925 1,818 863 463 401
Central –944 –1,140 –1,346 –1,604 –732
Eliminations –112 34 –51 16 –46
Operating income 5,504 8,199 6,461 5,766 5,144
Financial items 45 –118 –313 –293 –241
Income after financial items 5,549 8,081 6,148 5,473 4,903
Taxes –615 –1,555 –1,219 –1,365 –1,430
Profit for the year 4,934 6,526 4,929 4,108 3,473
Earnings per share, segment, SEK 12.01 15.89 11.96 9.98 8.43
Earnings per share after dilution, segment, SEK 11.94 15.80 11.87 9.88 8.39
Not 42. Continued
Skanska Annual Report 2017166 Notes, including accounting and valuation principles
Statements of financial position
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
ASSETSNon-current assets
Property, plant and equipment 6,874 6,837 6,504 7,122 7,449
Goodwill 4,554 5,270 5,256 5,276 4,849
Intangible assets 962 1,034 754 464 346
Investments in joint ventures and associated companies 3,314 4,160 2,852 2,618 2,734
Financial non-current assets 1, 3 2,276 1,016 1,357 1,302 1,892
Deferred tax assets 1,757 1,649 1,384 1,225 1,059
Total non-current assets 19,737 19,966 18,107 18,007 18,329
Current assets
Current-asset properties 2 39,010 33,678 27,020 26,115 25,757
Inventories 1,058 1,042 944 1,017 944
Financial current assets 3 6,671 10,095 7,496 5,839 5,955
Tax assets 1,188 784 691 929 984
Gross amount due from customers for contract work 6,997 5,751 5,692 5,472 6,232
Other operating receivables 27,778 29,759 25,877 26,288 22,227
Cash 6,998 5,430 11,840 9,107 7,303
Total current assets 89,700 86,539 79,560 74,767 69,402
TOTAL ASSETS 109,437 106,505 97,667 92,774 87,731
of which interest-bearing 15,800 16,318 20,511 16,049 14,997
EQUITYEquity attributable to equity holders 27,064 27,350 24,079 21,251 21,177
Non-controlling interests 121 156 127 154 187
Total equity 27,185 27,506 24,206 21,405 21,364
LIABILITIES
Non-current liabilities
Financial non-current liabilities 3 3,857 3,656 3,874 7,112 6,556
Pensions 5,603 4,901 3,969 4,655 3,411
Deferred tax liabilities 1,235 1,491 1,286 966 1,002
Non-current provisions 0 1 0 0 2
Total non-current liabilities 10,695 10,049 9,129 12,733 10,971
Current liabilities
Financial current liabilities 3 7,624 6,681 6,555 4,086 4,118
Tax liabilities 312 489 560 504 622
Current provisions 8,557 7,227 6,432 6,005 5,649
Gross amount due to customers for contract work 16,636 18,473 15,821 14,545 15,013
Other operating liabilities 38,428 36,080 34,964 33,496 29,994
Total current liabilities 71,557 68,950 64,332 58,636 55,396
TOTAL EQUITY AND LIABILITIES 109,437 106,505 97,667 92,774 87,731
of whom interest-bearing 16,926 15,099 14,194 15,351 14,025
1 Of which shares 42 44 61 35 32
2 Current-asset properties Commercial Property Development 23,615 19,728 16,650 14,956 13,700
Residential Development 15,395 13,950 10,370 11,159 11,257
Central 800
Total 39,010 33,678 27,020 26,115 25,757
3 Items related to non-interest-bearing unrealized changes in the value of derivatives/securities are included as follows.
Financial non-current assets 6 2 1 0 6
Financial current assets 97 177 120 164 115
Financial non-current liabilities 21 116 173 202 49
Financial current liabilities 137 49 72 335 55
Not 42. Continued
Skanska Annual Report 2017 167Notes, including accounting and valuation principles
Financial ratios 4
Dec 31, 2017 Dec 31, 2016 31 dec 2015 31 dec 2014 31 dec 2013
Order bookings 5 151,811 170,244 122,104 146,939 113,944
Order backlog 5 188,411 196,254 158,248 170,498 134,532
Average number of employees 40,759 42,903 48,470 57,858 57,105
Regular dividend per share, SEK 6 8.25 8.25 7.50 6.75 6.25
Earnings per share, SEK 10.00 13.96 11.63 9.35 9.14
Earnings per share after dilution, SEK 9.94 13.88 11.53 9.25 9.11
Operating financial assets 9,745 10,595 13,818 8,356 6,718
Capital employed 44,111 42,605 38,400 36,756 35,389
Interest-bearing net receivables /net debt –1,126 1,219 6,317 698 972
Equity per share, SEK 66.22 66.82 58.58 51.73 51.49
Equity/assets ratio, % 24.8 25.8 24.8 23.1 24.4
Debt/equity ratio 0.0 0.0 –0.3 0.0 0.0
Interest cover 288.0 88.7 57.9 59.5 40.5
Return on equity, % 15.5 24.9 21.9 18.8 18.8
Return on capital employed, % 11.1 19.2 17.4 15.5 16.1
Return on equity, segments, % 18.6 28.3 22.5 20.1 17.4
Consolidated return on capital employed in project development units, segments, % 14.5 18.4 14.9 10.4 10.1
Operating margin, % 2.9 5.0 4.1 3.8 4.1
Operating margin, Construction, % 0.8 2.6 2.8 3.5 3.3
Cash flow per share, SEK –2.44 –10.16 11.90 2.20 4.94
Number of shares at year-end 419,903,072 419,903,072 419,903,072 419,903,072 419,903,072
of which Series A shares 19,755,414 19,793,202 19,859,200 19,901,355 19,923,597
of which Series B shares 400,147,658 400,109,870 400,043,872 400,001,717 399,979,475
Average price, repurchased shares 137.31 132.18 121.02 113.81 107.85
Number of repurchased Series B shares 2,350,000 4,345,000 2,340,000 2,484,648 2,392,580
Number of Series B treasury shares, December 31 11,190,028 10,594,644 8,866,223 9,113,814 8,625,005
Number of shares outstanding, December 31 408,713,044 409,308,428 411,036,849 410,789,258 411,278,067
Average number of shares outstanding 409,447,407 409,896,419 411,059,056 411,088,591 411,721,772
Average number of shares outstanding after dilution 411,905,245 412,174,095 414,445,854 415,286,339 413,426,939
Average dilution, percent 0.60 0.55 0.82 1.01 0.41
4 For definitions, refer to Note 43 and 44.5 Refers to Construction.6 Proposed by the Board of Directors: Regular dividend of SEK 8.25 per share.
Note 42.Continued
Skanska Annual Report 2017168 Notes, including accounting and valuation principles
Note 43. Definitions
Average capital employed Calculated on the basis of five measuring points: half of capital employed on Janu-ary 1 plus capital employed at the end of the first, second and third quarters plus half of capital employed at year-end, divided by four.
Average visible equity Calculated on the basis of five measurement points: half of equity attributable to equity holders on January 1 plus equity attributable to equity holders at the end of the first, second and third quarters plus half of equity attributable to equity holders at year-end, divided by four.
Capital employed in business streams, markets and Business Units/reporting units
Total assets less tax assets and deposits in Skanska’s treasury unit minus non-interest-bearing liabilities excluding tax liabilities. Capitalized interest expense is removed from total assets for the Residential Development and Commercial Property Development segments.
Cash flow per share Cash flow before change in interest-bearing receivables and liabilities divided by the average number of shares outstanding.
Comprehensive income Change in equity not attributable to transactions with owners.
Consolidated capital employed Total assets minus non-interest-bearing liabilities.
Consolidated operating cash flow In the consolidated operating cash flow statement, which includes taxes paid, investments are recognized both in cash flow from business operations and in cash flow from strategic investments. See also Note 35.
Consolidated return on capital employed Operating income plus financial income as a percentage of average capital em-ployed.
Debt/equity ratio Interest-bearing net liabilities divided by visible equity including non-controlling interests.
Earnings per share Profit for the period attributable to equity holders divided by the average number of shares outstanding.
Earnings per share after dilution Profit for the year attributable to equity holders divided by the average number of shares outstanding after dilution.
Equity/assets ratio Equity including non-controlling interests as a percentage of total assets.
Equity per share Visible equity attributable to equity holders divided by the number of shares out-standing at year-end.
Interest-bearing net receivables/net debt Interest-bearing assets minus interest-bearing liabilities.
Interest cover Operating income and financial income plus depreciation/amortization divided by net interest items.
Negative/free working capital Non-interest-bearing receivables less non-interest-bearing liabilities excluding taxes.
Operating cash flow Cash flow from operations before taxes and before financial activities. See also Note 35.
Operating financial assets/liabilities net Interest-bearing net receivables/liabilities excluding construction loans to coopera-tive housing associations and interest-bearing pension liabilities.
Order backlog Contracting assignments: The difference between order bookings for the period and accrued revenue (accrued project costs plus accrued project income adjusted for loss provisions) plus order backlog at the beginning of the period. Services: The difference between order bookings and accrued revenue plus order backlog.
Skanska Annual Report 2017 169Notes, including accounting and valuation principles
Order bookings Contracting assignments: Upon written order confirmation or signed contract, where financing has been arranged and construction is expected to begin within 12 months. If a previously received order is canceled in a subsequent quarter, the cancellation is recognized as a negative item when reporting order bookings for the quarter when the cancellation occurs. Reported order bookings also include orders from Residential Development and Commercial Property Development, which assumes that a building permit has been obtained and construction is expected to begin within three months. Services: For fixed-price assignments, upon signing of contract. For cost-plus assignments, order bookings coincide with revenue. For service agreements, a maximum of 24 months of future revenue is included. No order bookings are reported in Residential Development and Commercial Property Development.
Other comprehensive income Comprehensive income minus profit according to the income statement. The item includes translation differences, hedging of exchange-rate risk in foreign opera-tions, remeasurements of defined-benefit pension plans, effects of cash flow hedges and tax attributable to other comprehensive income.
Return on equity Profit attributable to equity holders as a percentage of average visible equity at-tributable to equity holders.
Return on equity, segments Revenue according to segment reporting attributable to equity holders as a per-centage of average visible equity attributable to equity holders.
Return on capital employed, business streams, markets and business/report-ing units
Operating income, financial income minus interest income from Skanska’s treasury unit (internal bank) and other financial items as a percentage of average capital employed. For the Residential Development and Commercial Property Develop-ment segments, capitalized interest expense is removed from operating income so that the return reflects the return before mortgages.
Return on capital employed in project development units, segments
Operating income, financial income minus interest income from Skanska’s treasury unit (internal bank) and other financial items as a percentage of average capital em-ployed. For the Residential Development and Commercial Property Development segments, capitalized interest expense is removed from operating income so that the return reflects the return before mortgages. For Commercial Property Develop-ment and Infrastructure Development, the profit is adjusted so that the change in value of projects in progress is added and the difference between the market value and selling price for the year is added.
Note 43.Continued
Skanska Annual Report 2017170 Notes, including accounting and valuation principles
Note 44. Definitions – Non-IFRS key performance indicators
Adjusted equity attributable to equity holders, SEK bn
Equity attributable to equity holders 27.1
Unrealized surplus value in land in Residential Development 3.6
Unrealized development gain in Commercial Property Development 9.3
Effect on unrealized equity in Infrastructure Development 1.1
Less standard tax of 10% –1.3
Adjusted equity 39.8
Measures financial position adjusted for potentialfuture development gains in development units after tax. The standard tax rate represents an estimate of the average corporate tax rate within the Group.
Average capital employed Calculated on the basis of five measuring points, see page 172–173.
Average free working capital in Construction operations, SEK M
Calculated on the basis of five measuring points.
Q4 2017 –21,849 x 0.5 –10,924
Q3 2017 –19,414 –19,414
Q2 2017 –19,571 –19,571
Q1 2017 –20,694 –20,694
Q4 2016 –22,460 x 0.5 –11,230
–81,833 / 4 –20,458
Average equity attributable to equity holders, SEK M
Calculated on the basis of five measuring points.
Q4 2017 27,064 x 0.5 13,532
Q3 2017 25,185 25,185
Q2 2017 24,342 24,342
Q1 2017 28,866 28,866
Q4 2016 27,350 x 0.5 13,675
105,600 / 4 26,400
Capital employed, business streams, markets and business/reporting units.
Total assets less tax assets, receivables from Skanska’s internal bank and pension receivables minus non-interest-bearing liabilities, excluding tax liabilities. For Residential Development and Commercial Property Development, capitalized interest expense is also deducted from total assets.
Measures capital use and efficiency in business streams.
Capital employed Commercial Property Development, SEK M
Total assets 27,677
— tax assets –335
— receivables from internal bank 0
— pension receivables 0
— non—interest—bearing liabilities (excluding tax liabilities) –2,590
— capitalized interest expense –271
24,481
Measures capital use and efficiency in Commercial Property Development.
Definition Reason for useNon-IFRS key performance indicators
The following key performance indicators are used because they are deemed to optimally and correctly show Skanska’s operations reflected in the business model and strategy. They also help investors and management to analyze trends and results for Skanska.
Skanska Annual Report 2017 171Notes, including accounting and valuation principles
Definitions Reason for useNon-IFRS key performance indicators
Capital employed Infrastructure Development, SEK M
Total assets 2,476
— tax assets –495
— receivables from internal bank 0
— pension receivables 0
— non—interest—bearing liabilities (excluding tax liabilities) –172
1,809
Measures capital use and efficiency in Infrastructure Development.
Capital employed Residential Development, SEK M
Total assets 19,357
— tax assets –331
— receivables from internal bank –99
— pension receivables –13
— non—interest—bearing liabilities (excluding tax liabilities) –6,167
— capitalized interest expense –95
12,652
Measures capital use and efficiency in Residential Development.
Consolidated capital employed Total assets minus non-interest-bearing liabilities. Measures capital use and efficiency.
Debt/equity ratio Interest-bearing net liabilities divided by visible equity including non-controlling interests.
Measures debt equity ratio/leverage effect in financial position.
Earnings per share, segments Profit for the period, segments attributable to equity holders divided by average number of shares outstanding
Measures earnings per share, segments
Equity/assets ratio Equity including non-controlling interests as a percentage of total assets.
Measures financial position.
Financial items Net of interest income, pension interest, interest expense, capitalized interest expense, change in market value and other financial items.
Measures net financial activities.
Free working capital in construction Non-interest-bearing receivables less non-interest-bearing liabilities excluding taxes.
Measures financial capacity generated from negative working capital in Construction.
Gross income Revenue minus the cost of production and management. Measures income generated by the projects.
Gross margin Gross income divided by revenue. Measures profitability of the projects.
Income after financial items Operating income minus net of financial items. Measures pre-tax profit
Interest-bearing net receivables/net debt Interest-bearing assets minus interest-bearing liabilities. Measures financial position.
Net divestments/investments Total investments minus total divestments. Measures the balance between investments and divestments.
Net operating financial assets/liabilities (ONFAL)
Interest-bearing net receivables/liabilities excluding construction loans to cooperative housing associations and interest-bearing net pension liabilities.
Measures financial position and investment capacity. The latter is determined in a comparison with ONFAL against limits set by the Board of Directors.
Operating cash flow from business operations
Cash flow from business operations including taxes paid and cash flow from financing activities.
Measures financial capacity generated from negative working capital in Construction.
Operating income Revenue minus the cost of production and management, sales and administrative expenses and income from joint ventures and associ-ated companies.
Measures income in operations.
Operating income, segments Revenue minus the cost of production and management, sales and administrative expenses and income from joint ventures and associated companies, according to segment reporting and where Residential Development uses the proportional method for joint ventures.
Measures income in operations in the prevailing market situation.
Operating income, rolling 12-month basis
Revenue minus the cost of production and management, sales and administrative expenses and income from joint ventures and associated companies, rolling 12-month basis.
Measures income in operations.
Note 44 Continued
Skanska Annual Report 2017172 Notes, including accounting and valuation principles
Return on capital employed in Residential Development segment, rolling 12-month basis excluding Residential Development in the UK (as these operations have been discontinued), SEK M
Operating income 1,716
+ capitalized interest expense 118
+/— financial income and other financial items 12
— interest income from the internal bank –4
Adjusted earnings 1,842
Average capital employed 1 11,993
Return on capital employed in Residential Development 15.4%
1 Average capital employed
Q4 2017 12,686 x 0.5 6,343
Q3 2017 12,026 12,026
Q2 2017 11,728 11,728
Q1 2017 12,054 12,054
Q4 2016 11,642 x 0.5 5,821
47,972 / 4 11,993
Measures earnings (profitability and capital efficiency) in Residential Development.
Return on capital employed in Infrastructure Development segment, rolling 12-month basis, SEK M
For Infrastructure Development earnings are adjusted so that changes in value in ongoing projects and the difference between the market value and selling price in the current year are reflected.
Operating income 925
+/– adjustments according to the above –824
Adjusted earnings 101
Average capital employed 1 2,551
+/– adjustments according to the above 228
Adjusted average capital employed 2,779
Return on capital employed in Infrastructure Development 3.6%
1 Average capital employed
Q4 2017 1,809 x 0.5 904
Q3 2017 2,211 2,211
Q2 2017 2,227 2,227
Q1 2017 2,147 2,147
Q4 2016 5,434 x 0.5 2,717
10,206 / 4 2,551
Measures earnings (profitability and capital efficiency) Infrastructure Development.
Unrealized development gains, Commercial Property Development
Market value minus invested capital upon completion for ongoing projects, completed projects, and undeveloped land and development properties. Excludes projects sold according to segment reporting.
Measures potential future development gains in Commercial Property Development.
Definitions Reason for useNon-IFRS key performance indicators
Note 44. Continued
Skanska Annual Report 2017 173Notes, including accounting and valuation principles
Definitions Reason for useNon-IFRS key performance indicators
Note 44. Continued
Return on capital employed in Commercial Property Development segment, rolling 12-month basis, SEK M
For Commercial Property Development earnings are adjusted so that changes in value in ongoing projects and the difference between the market value and selling price in the current year are reflected.
Operating income 2,714
+/– adjustments according to the above 633
+ capitalized interest expense 59
+/– financial income and other financial items 14
– interest income from the internal bank 0
Adjusted earnings 3,420
Average capital employed 1 22,109
Return on capital employed in CPD 15.5%
1 Average capital employed
Q4 2017 24,481 x 0.5 12,240
Q3 2017 23,558 23,558
Q2 2017 22,012 22,012
Q1 2017 20,657 20,657
Q4 2016 19,936 x 0.5 9,968
88,435 / 4 22,109
Measures earnings (profitability and capital efficiency) in Commercial Property Development.
Return on capital employed in Project Development units, segments SEK M
Calculated as the sum of the adjusted earnings in Residential De-velopment, Commercial Property Development and Infrastructure Development divided by the sum of capital employed, average, for Residential Development, Commercial Property Development and Infrastructure Development.
Total return on capital employed in Residential Development, Commercial Property Development and Infrastructure Development.
Adjusted earnings
Average capital employed
Return on capital employed
Residential Development 1,842 11,993 15.4%
Commercial Prop-erty Development 3,420 22,109 15.5%
Infrastructure Development 101 2,779 3.6%
5,363 36,881 14.5%
Measures earnings (profitability and capital efficiency) in the project development units.
Return on equity, segments, rolling 12-month basis, SEK M
Profit attributable to equity holders as a percentage of average equity attributable to equity holders.
4,918 / 26,400= 18.6%
Measures profitability in invested capital.
Revenue, segments Revenue, segments, is the same as revenue IFRS in all business streams except Residential Development and Commercial Property Development, where revenue is recognized when binding contracts are signed for the sale of homes and properties. In segment reporting Residential Development uses the proportional method for joint ventures, which also impacts revenue segments.
Measures revenue generated in the existing market situation.
Sales and administrative expenses, % Selling and administrative expenses divided by revenue. Measures cost effectiveness in sales and adminis-trative expenses
Skanska Annual Report 2017174 Notes, including accounting and valuation principles
Note 45. Financial instruments, Parent Company
Financial instruments are presented in compliance with IFRS 7 Financial Instru-
ments: Disclosures. This note contains figures for the Parent Company’s financial
instruments. See also Note 1 to the consolidated financial statements, Accounting
and valuation principles, and Note 6 Financial instruments and financial risk
management.
Financial instruments in the balance sheet
2017 2016
Assets
Non-current receivables in Group companies 247 253
Current receivables in Group companies 18 15
Total financial instruments, assets 265 268
Liabilities
Non-current liabilities to Group companies 4,177 4,918
Trade accounts payable and current liabilities to Group companies 46 54
Total financial instruments, liabilities 4,223 4,972
The fair value of the Parent Company’s financial instruments does not deviate sig-
nificantly in any case from the carrying amount. All assets belong to the category
“Loans and trade accounts receivable.” No assets have been carried at fair value
through profit or loss. All financial liabilities belong to the category “Carried at
amortized cost.”
Reconciliation with the balance sheet 2017 2016
AssetsFinancial instruments 265 268
Other assetsProperty, plant and equipment and intangible assets 18 21
Holdings in Group companies, joint ventures and other securities 11,208 11,096
Other non-current receivables 107 95
Tax assets 85 75
Other current receivables and accrued receivables 137 137
Total assets 11,820 11,692
Equity and liabilities
Financial instruments 4,223 4,972
Other liabilities
Equity 7,213 6,360
Provisions 307 283
Other current liabilities and accrued liabilities 77 77
Total equity and liabilities 11,820 11,692
Impact of financial instruments on the Parent Company income statement
Financial income and expense recognized in financial items 2017 2016
Interest income on receivables 0 0
Interest expense on financial liabilities carried at amortized cost –63 –75
Total –63 –75
Parent company notes
The Parent Company has no income or expense from financial instruments that
are recognized directly in equity.
Risks attributable to financial instruments The Parent Company holds financial instruments almost exclusively in the form of
intra-Group receivables and liabilities. All external management of lending, bor-
rowing, interest and currencies is handled by the Group’s treasury unit (internal
bank), the subsidiary Skanska Financial Services AB. See also Note 6 to the consoli-
dated financial statements, Financial instruments and financial risk management.
Credit risk The carrying amount of financial instruments, assets, corresponded to the
maximum credit exposure on the closing day. There were no impairment losses on
financial instruments as of the closing day.
Note 46. Revenue, Parent Company
The Parent Company’s revenue consists mainly of amounts billed to Group
companies.
The amount includes SEK 693 M (668) in sales to subsidiaries. For other related
party transactions, see Note 63 Related party disclosures.
Note 47. Financial items, Parent Company
Earnings from holdings in
Group companies
Earnings from other financial
non-currentassets
Interestexpenses and similar items Total
2017
Dividend paid 4,466 4,466
Interest income 0 0
Interest expense –63 –63
Total 4,466 0 –63 4,403
2016
Dividend paid 3,597 3,597
Interest income 0 0
Interest expense –75 –75
Total 3,597 0 –75 3,522
Dividends The amount for dividends consists of dividends in accordance with a decision
by the Annual General Meeting, SEK 4,400 M ( 3,500 ) and Group contributions
received, SEK 66 M (97).
Net interest income/expense Of interest expense, SEK –63 M (–75) relates to Group companies.
Skanska Annual Report 2017 175Notes, including accounting and valuation principles
Note 48. Income taxes, Parent Company
2017 2016
Current taxes 0 0
Tax due to changed taxation –6
Deferred tax expenses/income from change in temporary differences 17 –15
Total 11 –15
The Swedish tax rate of 22.0 percent in relation to taxes recognized is explained in the table below.
2017 2016
Income after financial items 4,310 3,444
Tax at tax rate of 22.0 percent (22.0) –948 –758
Tax effect of:Dividends from subsidiaries 968 770
Other non-deductible expenses –9 –27
Recognized tax expense/income 11 –15
Non-deductible expenses refers mainly to costs related to the Group’s foreign operations.
Deferred tax assets
2017 2016
Deferred tax assets for employee-related provisions 78 61
Minus deferred tax liabilities for holdings –1 –1
Total 77 60
Change in deferred taxes in balance sheet
2017 2016
Deferred tax assets, January 1 60 75
Deferred tax expense/income 17 -15
Deferred tax assets, December 31 77 60
The Parent Company expects to be able to utilize deferred tax assets to offset Group contributions from Swedish operating subsidiaries.
Note 49. Intangible assets, Parent Company
Intangible assets are reported in compliance with IAS 38 Intangible assets.
See Note 1 Accounting and valuation principles.
Amortization of intangible assets for the year according to plan amounts to
SEK –3 M (–1) and is included in selling and administrative expenses.
In determining the amortization amount, the Parent Company has paid par-
ticular attention to estimated residual value at the end of useful life.
Intangible assets
2017 2016
Accumulated cost
January 1 27 13
Acquisitions 0 19
Disposals/divestments 0 –5
27 27
Accumulated amortization according to plan
January 1 –8 –12
Amortization for the year –3 –1
Disposals/divestments for the year 0 5
–11 –8
Accumulated impairment losses
January 1 0 0
0 0
Carrying amount, December 31 16 19
Carrying amount, January 1 19 1
Note 50. Property, plant and equipment, Parent Company
Property, plant and equipment are reported in compliance with IAS 16 Property,
Plant and Equipment. See Note 1.
Machinery and equipment owned by the Parent Company are recognized as
property, plant and equipment.
Depreciation on property, plant and equipment for the year according to plan
amounts to SEK 0 M (–1).
Plant and equipment
2017 2016
Accumulated cost
January 1 7 7
Additions 0 0
Disposals 0 0
7 7
Accumulated depreciation according to plan
January 1 –5 –4
Depreciation for the year 0 –1
Disposals for the year
–5 –5
Carrying amount, December 31 2 2
Carrying amount, January 1 2 3
Skanska Annual Report 2017176 Notes, including accounting and valuation principles
Note 51. Financial non-current assets, Parent Company
Holdings and receivables are reported as financial non-current assets. Holdings are allocated between holdings in Group companies and joint arrangements.
See Note 52 Holdings in Group companies and Note 53 Holdings in joint arrangements.
Receivables are allocated between receivables from Group companies, deferred tax assets and other non-current receivables.
Tax assets are described in Note 48 Income taxes. All receivables except deferred tax assets are interest-bearing.
Holdings
Holdings in Group companies Holdings in joint arrangementsOther non-current holdings of
securities
2017 2016 2017 2016 2017 2016
Accumulated cost
January 1 11,094 11,049 2 2 0 0
Share-based payments to employees of subsidiaries 1 112 45
Share of income 0 0 0 0
11,206 11,094 2 2 0 0
Accumulated impairment losses
January 1 0 0
0 0 0 0 0 0
Carrying amount, December 31 11,206 11,094 2 2 0 0
Carrying amount, January 1 11,094 11,049 2 2 0 0
1 Equivalent to the portion of the Group’s cost for Seop 2 and Seop 3 related to employees of subsidiaries and recognized in the Parent Company accounts as an increase in the carrying amount of holdings in Group companies and an increase in equity. If a decision is later made requiring a subsidiary to compensate the Parent Company for the value of the shares issued, receivables are transferred to the Group company. The amount for 2016 was thus reduced by SEK 163 M (203).
Receivables
Receivables from Group companiesOther non-current receivables
and deferred tax assets
2017 2016 2017 2016
Accumulated cost
January 1 253 216 155 228
Receivables added/settled –6 37 29 –73
247 253 184 155
Carrying amount, December 31 247 253 184 155
Carrying amount, January 1 253 216 155 228
Note 52. Holdings in Group companies, Parent Company
Skanska AB owns shares in two subsidiaries.
The subsidiary Skanska Kraft AB is a holding company that owns the Group’s shareholdings in Skanska Group operating companies. Skanska Financial Services AB is
the Group’s treasury unit (internal bank).
Company
Carrying amount
Corp. ID No. Registered office No. of shares 2017 2016
Swedish subsidiaries
Skanska Financial Services AB 556106-3834 Stockholm 500 000 67 68
Skanska Kraft AB 556118-0943 Stockholm 4 000 000 11,139 11,026
Total 11,206 11,094
Both subsidiaries are 100-percent owned by the Parent Company.
Skanska Annual Report 2017 177Notes, including accounting and valuation principles
Note 53. Holdings in joint arrangements, Parent Company
Company Corp. ID No. Registered officePercentage of
capital and votes
Carrying amount
2017 2016
Swedish joint arrangements
Sundlink Contractors HB 969620-7134 Malmö, Sweden 37 2 2
Total 2 2
The company has no operations other than fulfilling guarantee undertakings.
Note 54. Prepaid expenses and accrued income, Parent Company
The Parent Company has prepaid expenses and accrued income of SEK 13 M (9).
This amount consists of SEK 2 M (2) in prepaid insurance premiums and SEK 11 M
(7) in other accrued receivables.
Note 55. Equity, Parent Company
Restricted and unrestricted equityAccording to Swedish law, equity must be allocated between restricted and unre-
stricted equity. Share capital and the statutory reserve constitute restricted equity.
Unrestricted equity consists of retained earnings and profit for the year.
The equity of the Parent Company was allocated among SEK 1,260 M (1,260)
in share capital, SEK 598 M (598) in the statutory reserve, SEK 1,034 M 1,073) in
retained earnings and SEK 4,321 M (3,429) in profit for the year.
The Board of Directors proposes a dividend of SEK 8.25 (8.25) per share for the
2016 financial year.
The dividend for the year is expected to amount to SEK 3,377 M (3,075).
No dividend is paid for the Parent Company’s holding of Series B shares. The
total dividend amount may change by the record date, depending on repurchases
of shares and the transfer of Series B shares to participants in Skanska employee
ownership programs.
Number of shares
2017 2016
Average number of shares outstanding
after repurchases and conversion 409,447,407 409,896,419
after repurchases, conversion and dilution 411,905,245 412,174,095
Total number of shares 419,903,072 419,903,072
The number of shares amounted to 419,903,072 (419,903,072), divided into
19,793,202 (19,793,202) Series A shares and 400,147,658 (400,109,870) Series B
shares.
During the year 37,788 (65 998) ) Series A shares were converted into the same
number of Series B shares. 2,350,000 (4,345,000) Series B shares were repur-
chased. After distribution of 1,754,616 (2,616,579)shares, there were 11,190,028
(10 594 644) Series B treasury shares remaining.
The quota value per share amounts to SEK 3.00 (3.00). All shares are fully paid up.
Each Series A share carries 10 votes and each Series B share carries one vote.
Series B shares are listed on Nasdaq Stockholm.
According to the Articles of Association, Skanska’s share capital may not fall
below SEK 1,200 M nor exceed SEK 4,800 M.
Note 56. Provisions, Parent Company
Provisions are reported in compliance with IAS 37 Provisions, Contingent Liabilities
and Contingent Assets.
See Note 1 Accounting and valuation principles.
Provisions for pensionsand similar obligations Other provisions
2017 2016 2017 2016
January 1 172 224 111 86
Provisions for the year 15 36 95 95
Provisions utilized –13 –88 –73 –70
December 31 174 172 133 111
“Other provisions” consists of employee-related provisions.
The normal cycle time for “Other provisions” is about one to three years.
Employee-related provisions includes such items as social insurance contri-
butions for share investment programs, bonus programs and obligations to
employees.
Holdings in joint arrangements are reported in compliance with IFRS 11 Joint Arrangements. See Note 1 Accounting and valuation principles.
Skanska Annual Report 2017178 Notes, including accounting and valuation principles
Note 57. Provisions for pensions and similar obligations, Parent Company
Provisions for pensions are reported in compliance with the Pension Obligations
Vesting Act.
Pension liabilities according to the balance sheet
2017 2016
Interest-bearing pension liabilities 1 119 108
Other pension obligations 55 64
Total 174 172
1 Liabilities in compliance with the Pension Obligations Vesting Act.
2017 2016
The company’s total pension obligations 909 946
Less pension obligations secured through pension funds –735 –774
Provisions for pensions and similar obligations 1 174 172
1 Of which SEK 12 M (13) is secured through credit insurance. Other pension obligations are largely secured through pledged endowment policies
Of the company’s total pension obligations SEK 657 (691) is for ITP plans.
No payments to pensions funds are expected to be made in 2017.
Reconciliation, provisions for pensions
2017 2016
January 1 108 168
Pension expenses 15 22
Benefits paid –4 –82
Provisions for pensions according to the balance sheet 119 108
Note 58. Liabilities, Parent Company
Liabilities are allocated between non-current and current liabilities in compliance
with IAS 1 Presentation of Financial Statements. See Note 1 Accounting and valu-
ation principles.
Accrued expenses and prepaid incomeThe Parent Company has accrued expenses and prepaid income of SEK 72 (65).
This relates to accrued vacation pay of SEK 30 M (28), accrued special payroll tax
on pensions of SEK 22 M (21), accrued social insurance contributions of SEK 10 M
(9) and other accrued expenses of SEK 10 M (7).
Skanska Annual Report 2017 179Notes, including accounting and valuation principles
Note 59. Expected recovery period of assets, provisions and liabilities, Parent Company
Amounts expected to be recovered
2017 2016
within 12months
after 12months
after five years
(liabilities) Totalwithin 12
monthsafter 12months
after five years
(liabilities) Total
Intangible non-current assets 1 3 13 16 3 16 19
Property, plant and equipment 1 2 2 2 2
Financial non-current assets
Holdings in Group companies and joint arrangements 2 11,208 11,208 11,096 11,096
Receivables in Group companies 3 247 247 253 253
Other non-current receivables 107 107 95 95
Deferred tax assets 77 77 60 60
11,639 11,639 11,504 11,504
Current receivables
Current receivables in Group companies 18 18 15 15
Tax assets 8 8 15 15
Other current receivables 124 124 128 128
Prepaid expenses and accrued income 13 13 9 9
163 0 163 167 0 167
Total assets 166 11,654 11,820 170 11,522 11,692
Amounts expected to be paid
2017 2016
within 12months
after 12months
after five years
(liabilities) Totalwithin 12
monthsafter 12months
after five years
(liabilities) Total
Provisions
Provisions for pensions and similar obligations 13 161 174 24 148 172
Other provisions 77 56 133 84 27 111
90 217 307 108 175 283
Liabilities
Non-current liabilities
Liabilities to Group companies 4 4,177 4,177 4,918 4,918
0 0 4,177 4,177 0 0 4,918 4,918
Current liabilities
Trade accounts payable 20 20 28 28
Liabilities to Group companies 26 26 26 26
Tax liabilities 0 0 0 0
Other liabilities 5 5 12 12
Accrued expenses and prepaid income 72 72 65 65
123 0 0 123 131 0 0 131
Total liabilities and provisions 213 217 4,177 4,607 239 175 4,918 5,332
Total equity 7,213 6,360
Equity and liabilities 11,820 11,692
1 In case of amounts expected to be recovered within 12 months, expected annual depreciation/amortization has been recognized.2 No portion of the amount is expected to be recovered within 12 months.3 No portion of the amount is expected to be recovered within 12 months, since the lending is considered to be non-current.4 Intra-Group non-current interest-bearing liabilities are treated as having a maturity of more than five years from the closing day.
Skanska Annual Report 2017180 Notes, including accounting and valuation principles
Note 60. Assets pledged and contingent liabilities, Parent Company
Assets pledgedAssets pledged by the Parent Company totaled SEK 107 M (95), which relates
to assets in the form of non-current receivables. These assets were pledged as
collateral for some of the Parent Company’s pension obligations.
Contingent liabilitiesContingent liabilities are reported in compliance with IAS 37 Provisions,
Contingent Liabilities and Contingent Assets. Note 1 Accounting and valuation
principles, section IAS 37, describes the accounting principles
2017 2016
Contingent liabilities on behalf of Group companies 129,318 131,926
Other contingent liabilities 26,435 30,260
155,753 162,186
Of the Parent Company’s contingent liabilities on behalf of Group companies,
almost SEK 113 billion (117) relates to obligations for construction operations,
mainly guarantees provided when Group companies were awarded contracts.
The remaining contingent liabilities for Group companies relate to guarantees for
borrowing by Group companies from credit institutions, guarantee undertakings
in connection with divestment of properties by Group companies, guaranteeing
Group company undertakings to supply capital to their joint ventures and guaran-
tees for Group company pension obligations.
Of other contingent liabilities, SEK 16.5 billion (21.7) relates to liability for
external entities’ portion of ongoing contracting work. Of the remaining
SEK 9.9 billion (8.5), SEK 0.6 billion (1.5) is attributable to guarantees provided for
financing of joint arrangements in which Group companies are co-owners and
SEK 9.3 billion (7.0) is for guarantees in connection with financing of residential
projects in Sweden.
The amounts in the table above include the Parent Company’s contingent
liabilities relating to joint and several liability for trading company undertakings
of SEK 1 M (1). The company’s contingent liabilities relate entirely to guarantees
originating from surety provided or responsibilities as a shareholder in companies
.
Note 61. Cash flow statement, Parent Company
Adjustments for items not included in cash flow
2017 2016
Depreciation/amortization 3 2
Capital gain 0 -1
Cost of Seop, employee ownership programs 22 25
Total 25 26
Taxes paidTotal taxes paid in the Parent Company during the year amount to SEK 0 M (–1).
Information about interest and dividends
2017 2016
Interest income received during the year 0 0
Interest paid during the year 63 75
The change in interest-bearing liabilities belonging to financing activities is shown
in the following table.
2017 2016
January 1 4 918 4 769
Items affecting cash flow from financing activities –741 149
December 31 4 177 4 918
Note 62. Personnel, Parent Company
Wages, salaries, other remuneration and social insurance contributions
SEK M
2017 2016
Salaries and remuneration
Pensionexpenses
Salaries and remuneration
Pensionexpenses
Total salaries and remunera-tion, Board, President and other senior executives 148.8 23.1 104.1 19.1
of which variable remuneration 12.2 34.0
of which severance related compensation 50.5
Other employees 94.6 90.9 92.3 103.9
Less indemnification from pension fund –99.0 –101.0
Total 243.4 15.0 196.4 22.0
Social insurance contributions 102.0 110.0
of which pension expenses 15.0 22.0
For disclosures of individual remuneration to each Board member and the
President and CEO, see Note 37 Remuneration to senior executives and Board
members.
For Board members appointed by the employees, no disclosures are made
concerning salaries and remuneration or pensions since they do not receive these
in their capacity as Board members. For Board members who were employees
of the company prior to the beginning of the financial year, disclosures are made
concerning pension obligations in their former role as employees.
In 2017, bonuses paid to the President and CEO and other senior executives
amounted to SEK 32.9 M (31.2).
In 2017, an allotment of shares occurred under the employee ownership
program, Seop 3. The value of shares allotted amounted to SEK 33.7 M (32.3), of
which SEK 19.0 M (13.4) was for Board members, the President and CEO and other
senior executives.
The Parent Company’s pension expenses are calculated in compliance with the
Pension Obligations Vesting Act.
In 2017, Skanska’s Swedish pension funds reimbursed Skanska AB in the
amount of around SEK 99 M (101).
The company’s outstanding pension obligations to Presidents and CEOs,
including former Presidents and CEOs, amounted to SEK 152.7 M (46.6). The
company’s outstanding pension obligations to Executive Vice Presidents, including
former Executive Vice Presidents, amounted to SEK 89.9 M (89.2 ).
The cost in 2017 for defined-contribution pension plans was SEK 36.5 M (41.5)
excluding indemnification.
Average number of employeesPersonnel is calculated as the average number of employees. See Note 1 Accounting
and valuation principles.
2017of which
menof which women 2016
of which men
of which women
Sweden 124 52 72 111 48 63
Men and women on the Board of Directors and Senior Executive Team on closing day
2017of which
menof which women 2016
of which men
of which women
Number of Board members and deputy members 13 69% 31% 13 77% 23%
President and CEO, and other members of the Senior Executive Team 9 67% 33% 9 78% 22%
Skanska Annual Report 2017 181Notes, including accounting and valuation principles
Note 63. Related party disclosures, Parent Company
Through its ownership and percentage of voting power, AB Industrivärden has a
significant influence as defined in IAS 24 Related Party Disclosures.
Information on personnel expenses is found in Note 62 Personnel. For transac-
tions with senior executives, see Note 37 Remuneration to senior executives and
Board members.
2017 2016
Sales to Group companies 693 668
Purchases from Group companies –241 –224
Interest income from Group companies 0 0
Interest expense for Group companies –63 –75
Dividends from Group companies 4,466 3,597
Non-current receivables in Group companies 247 253
Current receivables in Group companies 18 15
Non-current liabilities to Group companies 4,177 4,918
Current liabilities to Group companies 26 26
Contingent liabilities on behalf of Group companies 129,318 131,926
Note 64. Disclosures in compliance with the Annual Accounts Act, Chapter 6, Section 2 a, Parent Company
Due to the requirements in the Swedish Annual Accounts Act, Chapter 6, Section
2 a, concerning disclosures on certain circumstances that may affect the possibility
of a takeover of the company through a public takeover bid for the shares in the
company, the following disclosures are hereby provided.
1. The total number of shares in the company on December 31, 2017 was
419,903,072, of which 19,755,414 were Series A shares with 10 votes each
and 400,147,658 Series B shares with one vote each.
2. There are no restrictions on the transferability of shares due to provisions in
the law or the Articles of Association.
3. Of the company’s shareholders, only AB Industrivärden and Lundbergs
directly or indirectly have a shareholding that represents at least one tenth
of the voting power of all shares in the company. On December 31, 2017, AB
Industrivärden’s holding amounted to 23.9 percent of total voting power in
the company and Lundbergs’ holding 12.4 percent of total voting power in
the company.
4. Skanska’s pension fund directly owns 370,000 Series B shares in Skanska.
There is also an insignificant proportion of indirectly owned shares via
investments in various mutual funds.
5. There are no restrictions on the number of votes each shareholder may cast
at an Annual General Meeting.
6. The company is not aware of any agreements between shareholders that
may result in restrictions on the right to transfer shares.
7. The Articles of Association state that the appointment of Board members
is to take place at the Company’s Annual General Meeting. The Articles of
Association contain no stipulations on dismissal of Board members or on
amendments to the Articles of Association.
8. The 2017 Annual General Meeting voted in favor of authorizing the com-
pany’s Board of Directors to decide on acquisitions of Skanska’s Series B
treasury shares through a regulated market on the following conditions:
A. Skanska Series B shares may only be acquired on Nasdaq Stockholm.
B. The authorization may be used on one or more occasions until the 2018
Annual General Meeting.
C. A maximum of 3,000,0000 Skanska Series B shares may be acquired to
secure the allotment of shares to participants in the Skanska employee
ownership program, Seop 4 and for subsequent transfer on a regulated
market to cover certain costs associated with Seop 4.
D. Skanska Series B shares on Nasdaq Stockholm may only be acquired at a
price within the applicable price interval at any given time, meaning the
interval between the highest purchase price and lowest selling price.
9. Skanska AB or its Group companies are not party to any material agree-
ment that will go into effect, be amended or cease to apply if control over
the company or Group companies changes as a consequence of a public
takeover bid.
10. There are agreements between Skanska AB or its Group companies and em-
ployees that prescribe remuneration if employment is terminated without
reasonable grounds. Such remuneration may not exceed 18 months’ fixed
salary after the end of the notice period or, in the case of the President and
CEO, a maximum of 24 months of severance pay. There are no agreements
prescribing termination of employment as a consequence of a public take-
over bid for the shares in the company.
Note 65. Supplementary information, Parent Company
Skanska AB, Swedish corporate identity number 556000-4615, is the Parent
Company of the Group.
The company has its registered office in Stockholm, Sweden, and is a limited
company in compliance with Swedish legislation.
The company’s headquarters are located in Stockholm, Sweden.
Address:
Skanska AB
SE-112 74 STOCKHOLM
Sweden
Tel: +46-10-448 00 00
Fax: +46-8-755 12 56
www.skanska.com
For questions concerning financial information,
please contact
Skanska AB, Investor Relations,
SE-112 74 STOCKHOLM, Sweden
Tel: +46-10-448 00 00
E-mail: [email protected]
Note 66. Events after the reporting period
There are no material events to report for the Parent Company during the period.
Skanska Annual Report 2017182 Vinstdisposition
Note 67. Allocation of earnings
The Board of Directors and the President and CEO propose that the profit for 2016 SEK
4,321,135,990, plus the retained earnings of SEK 1,033,333,156 carried forward from the
previous year, totaling 5,354,469,146 be allocated as follows:
A dividend to the
shareholders of 1 8.25 per share 3,371,882,613
To be carried forward 1,982,586,533
Total 5,354,469,146
The consolidated annual accounts and the annual accounts, respectively, have been prepared
in compliance with the international accounting standards referred to in Regulation (EC) No.
1606/2002 of the European Parliament and of the Council of July 19, 2002 on the application
of IFRS and generally accepted accounting principles, and provide a true and fair view of the
position and results of the Group and the Parent Company. The Report of the Directors for
the Group and the Parent Company provides a true and fair view of the operations, financial
position and results of the Group and the Parent Company, and describes the principal risks
and uncertainties facing the Parent Company and the companies included in the Group.
Stockholm den January 31, 2018
Hans Biörck
Chairman
Fredrik Lundberg
Board member
Catherine Marcus
Board member
Jane McGivern
Board member
Charlotte Strömberg
Board member
Richard Hörstedt
Board member
Gunnar Larsson
Board member
Anders Danielsson
President and Chief Executive Officer
Our Auditor’s Report was submitted on March 8, 2018
Ernst & Young AB
Hamish Mabon
Authorized Public Accountant
Jonas Svensson
Authorized Public Accountant
Pär Boman
Board member
John Carrig
Board member
Nina Linander
Board member
1 Based on the total number of shares outstanding on December 31, 2017. The total dividend amount may change by the record
date, depending on repurchases of shares and the transfer of shares to participants in long-term employee ownership programs.
Skanska Annual Report 2017 183Auditor´s report
Auditor´s reportThis is a translation from the Swedish original
To the general meeting of the shareholders of Skanska AB (publ), corporate identity number 556000–4615
Report on the annual accounts and consolidated accounts
Opinions
We have audited the annual accounts and consolidated accounts of
Skanska AB (publ) for the year 2017 except for the corporate governance
statement on pages 49–55 and the statutory sustainability report on pages
70–83. The annual accounts and consolidated accounts of the company
are included on pages 61–182 in this document.
In our opinion, the annual accounts have been prepared in accordance
with the Annual Accounts Act and present fairly, in all material respects,
the financial position of the parent company as of 31 December 2017
and its financial performance and cash flow for the year then ended in
accordance with the Annual Accounts Act. The consolidated accounts
have been prepared in accordance with the Annual Accounts Act and
present fairly, in all material respects, the financial position of the group as
of December 31, 2017 and their financial performance and cash flow for
the year then ended in accordance with International Financial Report-
ing Standards (IFRS), as adopted by the EU, and the Annual Accounts Act.
Our opinions do not cover the corporate governance statement on pages
49–55 and the statutory sustainability report on pages 70–83. The statu-
tory administration report is consistent with the other parts of the annual
accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders
adopts the income statement and balance sheet for the parent company
and the group.
Our opinions in this report on the annual accounts and consolidated
accounts are consistent with the content of the additional report that has
been submitted to the parent company’s audit committee in accordance
with the Audit Regulation (537/2014) Article 11.
Basis for Opinions
We conducted our audit in accordance with International Standards on
Auditing (ISA) and generally accepted auditing standards in Sweden. Our
responsibilities under those standards are further described in the Audi-
tor’s Responsibilities section. We are independent of the parent company
and the group in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities in accor-
dance with these requirements. This includes that, based on the best of
our knowledge and belief, no prohibited services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided to the audited com-
pany or, where applicable, its parent company or its controlled companies
within the EU.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Key Audit Matters
Key audit matters of the audit are those matters that, in our professional
judgment, were of most significance in our audit of the annual accounts
and consolidated accounts of the current period. These matters were
addressed in the context of our audit of, and in forming our opinion there-
on, the annual accounts and consolidated accounts as a whole, but we do
not provide a separate opinion on these matters. For each matter below,
our description of how our audit addressed the matter is provided in that
context.
We have fulfilled the responsibilities described in the Auditor’s respon-
sibilities for the audit of the financial statements section of our report,
including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the
risks of material misstatement of the financial statements. The results of
our audit procedures, including the procedures performed to address the
matters below, provide the basis for our audit opinion on the accompany-
ing financial statements.
Percentage-of-completion method
A significant portion of the company´s revenues relate to construction con-
tracts. For 2017 the revenues from construction contracts amount to SEK
131,510 M. The company applies the percentage-of-completion method
i.e. a forecast of final project revenues and results is recognized gradually
over the course of the project based on the degree of completion. This
requires that the project revenues and project expenses can be reliably
determined. This in turn requires that the Group has effective, coordinated
systems for cost estimation, forecasting and revenue/expense reporting.
The system also requires a consistent process to assess the final outcome of
the project, including analysis of differences compared with earlier assess-
ment dates. This critical judgment is performed at least once per quarter.
Our audit procedures include, among others, audit of material contracts
including significant judgements relating to profit recognition and alloca-
tion of costs. We have audited material contracts to identify potential
penalties due to any delayed milestones in the projects. We also assessed
the historical accuracy of management’s estimates of the final outcomes
of projects and evaluated the adequacy of the Company’s disclosures
included in Note 9 Construction contracts.
Valuation of Investments in Infrastructure Development
Potential impairment in completed infrastructure projects remaining
in a joint venture ownership structure could have significant impact on
Skanska´s net income. These projects are normally material and the invest-
ment cycle could be long. The expected cash flows from these investments
could extend beyond 20 years in to the future.
The Investments in Infrastructure Development amounts to SEK 1,944 M
as of December 31, 2017. As outlined in Note 20 B “Investments in joint
ventures and associated companies” of the Annual Report the company
determines an estimated value for infrastructure projects by discounting
estimated future cash flows in the form of dividends and repayments of
loans and equity. The discount rate chosen is applied to all future cash
flows starting on the appraisal date. Our audit procedures included among
others assessing budgets and financial projections and reviewing other
financial input used to determine the value in use models. We have also
Skanska Annual Report 2017184 Auditor´s report
audited work performed by external appraisers. We specifically focused
on the sensitivity in the difference between the estimated value and book
values of the projects, where a reasonably possible change in assumptions
could cause the carrying amount to exceed its estimated present value.
We also assessed the historical accuracy of management’s estimates. We
evaluated the adequacy of the Company’s disclosures included in Note 20 B.
Claims and litigation
The non-current provision for legal disputes amounts to SEK 941 M as
of December 31, 2017. As outlined in Note 29 “Provisions” of the Annual
Report, the Company is exposed to potential claims and disputes in the
Construction business stream for projects that have been completed.
Claims and disputes including any provisions are a key audit matter to
our audit because management judgement is required. The assessment
process is complex and entails assessing future developments. In addition
some of the claims are in countries where the legal proceedings can stretch
out over an extended period of time.
We have gained an understanding of the claims and litigation through
discussions with in house Legal Counsel. We have read the internal posi-
tion papers prepared by the Company. We also obtained lawyers’ letters
to the extent considered necessary for our audit. For all potentially material
claims we tested the underlying facts and circumstances considered rel-
evant for the legal advisors to reach their conclusions and assessed the best
estimate of outflows as determined by the Company.
Other information than the annual accounts and consolidated accounts
This document also contains other information than the annual accounts
and consolidated accounts and is found on pages 1–60 and 189–197. The
Board of Directors and the Managing Director are responsible for this other
information.
Our opinion on the annual accounts and consolidated accounts does
not cover this other information and we do not express any form of assur-
ance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated
accounts, our responsibility is to read the information identified above
and consider whether the information is materially inconsistent with the
annual accounts and consolidated accounts. In this procedure we also take
into account our knowledge otherwise obtained in the audit and assess
whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, con-
clude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the
preparation of the annual accounts and consolidated accounts and that
they give a fair presentation in accordance with the Annual Accounts Act
and, concerning the consolidated accounts, in accordance with IFRS as
adopted by the EU. The Board of Directors and the Managing Director are
also responsible for such internal control as they determine is necessary to
enable the preparation of annual accounts and consolidated accounts that
are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board of
Directors and the Managing Director are responsible for the assessment of
the company’s and the group’s ability to continue as a going concern. They
disclose, as applicable, matters related to going concern and using the
going concern basis of accounting. The going concern basis of accounting
is however not applied if the Board of Directors and the Managing Director
intends to liquidate the company, to cease operations, or has no realistic
alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director’s
responsibilities and tasks in general, among other things oversee the com-
pany’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the
annual accounts and consolidated accounts as a whole are free from mate-
rial misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinions. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance
with ISAs and generally accepted auditing standards in Sweden will always
detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these annual accounts and consoli-
dated accounts.
As part of an audit in accordance with ISAs, we exercise professional judg-
ment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the annual
accounts and consolidated accounts, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinions. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresenta-
tions, or the override of internal control.
• Obtain an understanding of the company’s internal control relevant to
our audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control.
• Evaluate the appropriateness of accounting policies used and the rea-
sonableness of accounting estimates and related disclosures made by
the Board of Directors and the Managing Director.
• Conclude on the appropriateness of the Board of Directors’ and the
Managing Director’s use of the going concern basis of accounting in pre-
paring the annual accounts and consolidated accounts. We also draw
a conclusion, based on the audit evidence obtained, as to whether any
material uncertainty exists related to events or conditions that may cast
significant doubt on the company’s and the group’s ability to continue
as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related
disclosures in the annual accounts and consolidated accounts or, if such
disclosures are inadequate, to modify our opinion about the annual
accounts and consolidated accounts. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause a company and a group to cease
to continue as a going concern.
Skanska Annual Report 2017 185Auditor´s report
• Evaluate the overall presentation, structure and content of the annual
accounts and consolidated accounts, including the disclosures, and
whether the annual accounts and consolidated accounts represent the
underlying transactions and events in a manner that achieves fair pre-
sentation.
• Obtain sufficient and appropriate audit evidence regarding the financial
information of the entities or business activities within the group to
express an opinion on the consolidated accounts. We are responsible
for the direction, supervision and performance of the group audit. We
remain solely responsible for our opinions.
We must inform the Board of Directors of, among other matters, the
planned scope and timing of the audit. We must also inform of significant
audit findings during our audit, including any significant deficiencies in
internal control that we identified.
We must also provide the Board of Directors with a statement that we
have complied with relevant ethical requirements regarding indepen-
dence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the Board of Directors, we
determine those matters that were of most significance in the audit of the
annual accounts and consolidated accounts, including the most important
assessed risks for material misstatement, and are therefore the key audit
matters. We describe these matters in the auditor’s report unless law or
regulation precludes disclosure about the matter.
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated accounts,
we have also audited the administration of the Board of Directors and the
Managing Director of Skanska AB (publ) for the year 2017 and the pro-
posed appropriations of the company’s profit or loss.
We recommend to the general meeting of shareholders that the profit be
appropriated in accordance with the proposal in the statutory administra-
tion report and that the members of the Board of Directors and the Man-
aging Director be discharged from liability for the financial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted auditing
standards in Sweden. Our responsibilities under those standards are fur-
ther described in the Auditor’s Responsibilities section. We are indepen-
dent of the parent company and the group in accordance with professional
ethics for accountants in Sweden and have otherwise fulfilled our ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors is responsible for the proposal for appropriations of
the company’s profit or loss. At the proposal of a dividend, this includes an
assessment of whether the dividend is justifiable considering the require-
ments which the company’s and the group’s type of operations, size and
risks place on the size of the parent company’s and the group’s equity, con-
solidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company’s organization and
the administration of the company’s affairs. This includes among other
things continuous assessment of the company’s and the group’s financial
situation and ensuring that the company’s organization is designed so that
the accounting, management of assets and the company’s financial affairs
otherwise are controlled in a reassuring manner. The Managing Director
shall manage the ongoing administration according to the Board of Direc-
tors’ guidelines and instructions and among other matters take measures
that are necessary to fulfill the company’s accounting in accordance with
law and handle the management of assets in a reassuring manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, and thereby
our opinion about discharge from liability, is to obtain audit evidence to
assess with a reasonable degree of assurance whether any member of the
Board of Directors or the Managing Director in any material respect:
• has undertaken any action or been guilty of any omission which can give
rise to liability to the company, or
• in any other way has acted in contravention of the Companies Act, the
Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations of the
company’s profit or loss, and thereby our opinion about this, is to assess
with reasonable degree of assurance whether the proposal is in accor-
dance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with generally accepted auditing
standards in Sweden will always detect actions or omissions that can give
rise to liability to the company, or that the proposed appropriations of the
company’s profit or loss are not in accordance with the Companies Act.
As part of an audit in accordance with generally accepted auditing
standards in Sweden, we exercise professional judgment and maintain pro-
fessional skepticism throughout the audit. The examination of the admin-
istration and the proposed appropriations of the company’s profit or loss is
based primarily on the audit of the accounts. Additional audit procedures
performed are based on our professional judgment with starting point in
risk and materiality. This means that we focus the examination on such
actions, areas and relationships that are material for the operations and
where deviations and violations would have particular importance for the
company’s situation. We examine and test decisions undertaken, support
for decisions, actions taken and other circumstances that are relevant to
our opinion concerning discharge from liability. As a basis for our opinion
on the Board of Directors’ proposed appropriations of the company’s profit
or loss we examined the Board of Directors’ reasoned statement and a
selection of supporting evidence in order to be able to assess whether the
proposal is in accordance with the Companies Act.
Skanska Annual Report 2017186 Auditor´s report
The auditor’s examination of the corporate governance statement
The Board of Directors is responsible for that the corporate governance
statement on pages 49–55 has been prepared in accordance with the
Annual Accounts Act.
Our examination of the corporate governance statement is conducted
in accordance with FAR´s auditing standard RevU 16 The auditor´s examina-
tion of the corporate governance statement. This means that our examina-
tion of the corporate governance statement is different and substantially
less in scope than an audit conducted in accordance with International
Standards on Auditing and generally accepted auditing standards in Swe-
den. We believe that the examination has provided us with sufficient basis
for our opinions.
A corporate governance statement has been prepared. Disclosures in
accordance with chapter 6 section 6 the second paragraph points 2-6 of
the Annual Accounts Act and chapter 7 section 31 the second paragraph
the same law are consistent with the other parts of the annual accounts
and consolidated accounts and are in accordance with the Annual
Accounts Act.
The auditor´s opinion regarding the statutory sustainability report
The Board of Directors is responsible for the statutory sustainability report
on pages 70–83, and that it is prepared in accordance with the Annual
Accounts Act.
Our examination has been conducted in accordance with FAR’s auditing
standard RevR 12 The auditor´s opinion regarding the statutory sustainabil-
ity report. This means that our examination of the statutory sustainability
report is different and substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and generally
accepted auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinion. A statutory sustain-
ability report has been prepared.
Ernst & Young AB, Box 7850, 103 99 Stockholm, was appointed auditor
of Skanska AB (publ) by the general meeting of the shareholders on the 4th
of April 2017 and has been the company’s auditor since 2016.
Stockholm March 8, 2018
Ernst & Young AB
Hamish Mabon Jonas Svensson
Authorized Public Accountant Authorized Public Accountant
Skanska Annual Report 2017 187Auditor´s report
This is a translation from the Swedish original
To Skanska AB
We have undertaken a limited assurance engagement of the accompany-
ing Greenhouse gas reporting of Skanska AB for the year ended December
31, 2017, comprising the emissions inventory and the explanatory notes on
page 69 of the Skanska Annual Report 2017.
Skanska AB’s Responsibility for the Greenhouse gas reporting
Skanska AB is responsible for the preparation of the Greenhouse gas
reporting in accordance with the Greenhouse Gas Protocol (published by
the World Resources Institute (WRI) and the World Business Council for
Sustainable Development (WBCSD), applied as explained in the Green-
house gas reporting section of the Sustainability report section on pages
65-79 of the Skanska Annual Report 2017. This responsibility includes the
design, implementation and maintenance of internal control relevant to
the preparation of a greenhouse gas reporting that is free from material
misstatement, whether due to fraud or error.
As discussed in the Greenhouse gas reporting section of the Sustainabil-
ity report, greenhouse gas quantification is subject to inherent uncertainty
because of incomplete scientific knowledge used to determine emissions
factors and the values needed to combine emissions of different gases.
Our Independence and Quality Control
We have complied with the independence and other ethical requirements
of the Code of Ethics for Professional Accountants issued by the Interna-
tional Ethics Standards Board for Accountants, which is founded on fun-
damental principles of integrity, objectivity, professional competence and
due care, confidentiality and professional behavior.
The firm applies International Standard on Quality Control 1, ISQC 1,
Quality Control for Firms that Perform Audits and Reviews of Financial
Statements, and Other Assurance and Related Services Engagements and
accordingly maintains a comprehensive system of quality control including
documented policies and procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory
requirements.
Our Responsibility
Our responsibility is to express a limited assurance conclusion on the
Greenhouse gas reporting based on the procedures we have performed
and the evidence we have obtained. We conducted our limited assurance
engagement in accordance with International Standard on Assurance
Engagements 3410, Assurance Engagements on Greenhouse Gas State-
ments (“ISAE 3410”), issued by the International Auditing and Assurance
Standards Board. That standard requires that we plan and perform this
engagement to obtain limited assurance about whether the Greenhouse
gas reporting is free from material misstatement.
A limited assurance engagement undertaken in accordance with ISAE
3410 involves assessing the suitability in the circumstances of Skanska’s
use of the Greenhouse Gas Protocol as the basis for the preparation of the
Greenhouse gas reporting, assessing the risks of material misstatement of
the Greenhouse gas reporting whether due to fraud or error, responding
to the assessed risks as necessary in the circumstances, and evaluating the
overall presentation of the Greenhouse gas reporting. A limited assurance
engagement is substantially less in scope than a reasonable assurance
engagement in relation to both the risk assessment procedures, including
an understanding of internal control, and the procedures performed in
response to the assessed risks.
The procedures we performed were based on our professional judg-
ment and included inquiries, observation of processes performed, inspec-
tion of documents, analytical procedures, evaluating the appropriateness
of quantification methods and reporting policies, and agreeing or reconcil-
ing with underlying records.
The procedures performed in a limited assurance engagement vary
in nature and timing from, and are less in extent than for, a reasonable
assurance engagement. Consequently, the level of assurance obtained in
a limited assurance engagement is substantially lower than the assurance
that would have been obtained had we performed a reasonable assur-
ance engagement. Accordingly, we do not express a reasonable assurance
opinion about whether Skanska’s Greenhouse gas reporting has been
prepared, in all material respects, in accordance with the Greenhouse Gas
Protocol applied as explained in the Greenhouse gas reporting section of
the Sustainability report.
Conclusion
Based on the procedures we have performed and the evidence we have
obtained, nothing has come to our attention that causes us to believe that
Skanska’s Greenhouse gas reporting for the year ended December 31, 2017
is not prepared, in all material respects, in accordance with the Green-
house Gas Protocol applied as explained in Greenhouse gas reporting sec-
tion of the Sustainability report.
Stockholm March 8, 2018
Ernst & Young AB
Hamish Mabon
Authorized Public
Accountant
Jonas Svensson
Authorized Public
Accountant
Ingrid Cornander
Authorized Public
Accountant Specialist,
Climate Change
Sustainability Services
Independent practitioner’s review report on Skanska AB’s greenhouse gas reporting
Skanska Annual Report 2017188 Auditor´s report
Homes that make good – and green – neighbors
Skanska Annual Report 2017 189Major orders, investments and divestments
U Cukrovaru and Botanica K, Prague, Czech Republic
Residential Development and Construction
When buying a home, the location, price and layout are important basics. Skanska develops
apartment houses with distinctive benefits that offer even more.
For U Cukrovaru, shown here, Skanska engaged with neighbors to determine what could
benefit both them and future residents. It turned out to be a public park for relaxing and
dog walking, and this was incorporated into the project. This participation process has set a
new path for local Residential Development projects.
Botanica K uses treated water from sinks, bathtubs and showers for flushing toilets. Com-
bined with other water efficiency solutions, this approach reduces potable water consump-
tion by about 40 percent, helping lower both environmental impacts and utility bills.
Skanska Annual Report 2017190 Major orders, investments and divestments
Major orders, investments and divestments
Orders
Q1
Skanska invests USD 360 M, about SEK 3.2 billion in a new office project in Houston, USA.
Skanska builds new hospital in Kainuu, Finland, for EUR 69 M, about SEK 670 M.
Skanska constructs an office building, Sthlm 01, in Stockholm, Sweden for about SEk 1.0 billion.
Skanska signs seven-year highways maintenance contract in Somerset, UK, worth 50 M the first two years, about SEK 570 M.
Skanska builds new Sixth Street Viaduct in Los Angeles, USA, for USD 134 M, about SEK 1.2 billion.
Skanska builds energy-positive office building in Trondheim, Norway, for NOK 370 M, about SEK 390 M.
Skanska upgrades freeway in San Diego, USA, for USD 88 M, about SEK 750 M.
Skanska builds light rail in Lund, Sweden, for about SEK 710 M.
Skanska renovates the Olympic Stadium in Helsinki, Finland, for EUR 156 M, about SEK 1.5 billion.
Skanska builds the road E6 in southern Helgeland, Norway, for NOK 2.3 billion, about SEK 2.4 billion.
Skanska constructs new building for offices and retail in Stockholm, Sweden, for SEK 1.2 billion.
Skanska constructs a new office project in Seat-tle, USA, for USD 228 M, about SEK 2.0 billion.
Skanska builds railway in Sundsvall, Sweden, for SEK 320 M.
Skanska refurbishes mixed-use development in London, UK, for GBP 73 M, about SEK 810 M.
Skanska expands hospital in Vestfold, Norway, for NOK 960 , about SEK 1.0 billion.
Skanska signs seven-year highways maintenance contract in Hampshire, UK, for GBP 80 M, about SEK 890 billion.
Q2Skanska builds power plant in Høyanger municipality, Norway, for NOK 350 M, about SEK 370 M.
Skanska renovates tunnels in Oslo, Norway, for NOK 516 M, about SEK 550 M.
Skanska builds the I-15 Express Lanes project in California, USA, for USD 146 M, about SEK 1.3 billion.
Skanska signs contract for USD 35 M, about SEK 310 M, for ongoing project in New York City, USA.
Skanska renovates and expands University hospital in Virginia, USA, for USD 45 M, about SEK 400 M.
Skanska builds 40-story residential tower in Seattle, USA, for USD 152 M, about SEK 1.4 billion.
Skanska builds apartments in Helsinki, Finland, for EUR 38 M, about SEK 360 M.
Skanska Annual Report 2017 191Major orders, investments and divestments
Orders
Skanska expands S:t Görans Hospital in Stockholm, Sweden, for about SEK 1.3 billion.
Skanska renovates commercial building in New York City, USA, for US 48 M, about SEK 430 M.
Skanska renovates four subway stations in New York City, USA, for USD 150 M, about SEK 1.3 billion.
Skanska converts Farley Post Office Building into major transport hub in NYC, USA, for USD 1.26 billion, about SEK 11 billion.
Skanska builds new recreation center for Boston College in Massachusetts, USA for USD 113 M, about SEK 1 billion.
Skanska renovates east end of Las Olas Boulevard in Florida, USA, for USD 49 M, about SEK 440 M.
Skanska builds rental apartments in Stockholm, Sweden, for about SEK 400 M.
Skanska builds manufacturing facility in western USA for USD 120M, about SEK 1.1 billion.
Q3
Skanska to build mixed-use development in London, UK, for GBP 142M, about SEK1.6 billion.
Skanska builds care facility at Kungälv Hospital, Sweden, for about SEK 940M.
Skanska builds new hotel at Arlanda Airport in Stockholm, Sweden, for about SEK 710 M.
Skanska builds new research and education tower in Tampa, USA, for USD 41 M, about SEK 360 M.
Skanska builds Sundsta-Älvkulle Upper Secondary School in Karlstad, Sweden, for about SEK 410 M.
Skanska signs ten-year highways maintenance contract in Cambridgeshire, UK, worth GBP 64 M the first two years, about SEK 710 M.
Skanska builds office building and movie theater in Tysons Corner, USA, for USD 167M, about SEK 1.5 billion.
Skanska renovates commercial office building in London, UK, for GBP 41 M, about SEK 460 M.
Skanska extends county road in Nord Trøn-delag, Norway, for NOK 360 M, about SEK 380 M.
Skanska designs and prepares construction for High Speed Two in London, UK, for GBP 27 M, about SEK 300 M.
Skanska renovates tunnels in Akershus, Norway, for NOK 385 M, about SEK 400 M.
Q4
Skanska builds court- and office building in Sollentuna, Sweden, for about SEK 420 M.
Skanska builds conference hotel in Drammen, Norway, for NOK 300 M, about 310 M.
Skanska builds warehouse in Portland, USA, for USD 63 M, about SEK 540 M.
Skanska builds research facilities in New Jersey, USA, for USD 43 M, about SEK 350 M.
Skanska rehabilitates George Washington Bridge in New York City, USA, for USD 452 M, about SEK 3.9 billion.
Skanska signs additional contract for manufacturing facility in western USA, for USD 121 M, about SEK 1 billion.
Skanska expands Portland International Airport in Portland, USA, for USD 151M, about SEK 1.3 billion.
Skanska builds new residence hall in Durham, USA, for USD 61 M, about SEK 520 M.
Skanska builds replacement schools in Cincinnati, USA, for USD 65 M, about SEK 560 M.
Skanska builds a combined city hall and station building in Växjö, Sweden for SEK 580 M.
Skanska builds collegiate facility in Pennsylvania, USA for USD 47 M, about SEK 400 M.
Skanska renovates facility near Philadelphia, USA, for USD 85 M, about SEK 730 M.
Skanska constructs mixed-use facility in Massachusetts, USA, for USD 125 M, about SEK 1.1 billion.
Skanska builds mixed-used development in London, UK for GBP 127M, about SEK 1.4 bil-lion.
Skanska restores lagoon in San Diego, USA, for USD 38 M, about SEK 325 M.
Skanska renovates commercial building in New York City, USA, for US 48 M, about SEK 430 M.
Skanska builds medical office building in Franklin, USA, for USD 40 M, about SEK 340 M.
Skanska signs additional contract for manufacturing facility in western USA, for USD 81 M, about SEK 690 M.
Skanska builds mixed-use development in Mad-isonville, USA, for USD 100 M, about SEK 850 M.
Skanska builds graduate student housing in San Francisco, USA, for USD 170 M, about SEK 1.5 billion.
Skanska Annual Report 2017192 Major orders, investments and divestments
Investments
Q1
Skanska invests SEK 1.3 billion in the office building Sthlm 01 in Stockholm, Sweden.
Skanska invests EUR 38 M, about SEK 370 M, in the first phase of an office project in Bucharest, Romania.
Skanska invests EUR 33 NM, about SEK 310 M, in second phase of an office project in Buda-pest, Hungary.
Skanska invests USD 392 M, about SEK 3.5 bil-lion, in a new office project in Seattle, USA.
Skanska invests in land in Prague, Czech Repub-lic, for CZK 841 M, about SEK 290 M.
Skanska invests USD 360 M, about SEK 3.2 bil-lion in a new office project in Houston, USA.
Q2Skanska invests EUR 46 M, about SEK 440 M, in phase I of an office project in Lodz, Poland.
Skanska invests about SEK 430 M in the office building Epic in Malmö, Sweden.
Skanska invests EUR 44 M, about SEK 420 M, in the second phase of an office project in Warsaw, Poland.
Q3Skanska invests EUR 37 M, about SEK 360 M, in the first phase of a new office project in Bucha-rest, Romania.
Skanska invests in land in Mölndal, Sweden, for about SEK 280 M.
Skanska invests EUR 48 M, about SEK 460 M, in phase I in mixed-use project in Poznan, Poland.
Skanska invests DKK 566 M, about SEK 730 M, in a new hotel project in Copenhagen, Den-mark.
Skanska invests EUR 27 M, about SEK 260 M, in a new office project in Prague, Czech Republic.
Q4Skanska invests about SEK 250 M to increase the capacity in BoKlok’s factory in Gullringen, Sweden.
Skanska invests EUR 44 M, about SEK 420 M, in a new office building in Krakow, Poland.
Skanska Annual Report 2017 193Major orders, investments and divestments
Divestments
Q1Skanska’s divestment of its investment in the A1 highway, Poland, was completed.
Skanska sells office building in Solna, Sweden, for about SEK 300 M.
Skanska sells office building in Poznan, Poland, for EUR 62 M, about SEK 590 M.
Skanska sells office property in Vantaa, Finland, for about EUR 31 M, about SEK 290 M.
Q2
Skanska sells residential project in Copenhagen, Denmark, for 880 M, about SEK 1.1 billion.
Skanska sells the office building Piren2 in Gothenburg, Sweden, for about SEK 410 M.
Skanska sells office building in Bucharest, Romania, for EUR 38 M, about SEK 370 M.
Skanska sells office building in Stockholm, Swe-den, for about SEK 440 M.
Skanska divests three properties in Stockholm, Sweden, for about SEK 850 M.
Skanska sells office building in Prague, Czech Republic, for EUR 50 M, about SEK 480 M.
Skanska divests three buildings at Linnaeus University in Kalmar, Sweden, for about SEK 1.1 billion.
Q3
Skanska sells office building in Oslo, Norway, for NOK 795 M, about SEK 830 M.
Skanska sells office building in Stockholm, Sweden, for about SEK 900 M.
Q4Skanska divests its investment in the Sjisjka wind farm in Gällivare, Sweden, for about SEK 160 M.
Skanska sells nursing home in Gothenburg, Sweden, for about SEK 240 M.
Skanska sells office building in Warsaw, Poland, for EUR 83 M, about SEK 800 M.
Skanska sells multi-family development in Boston, USA, vor about USD 60 M, about SEK 510 M.
Skanska sells two office buildings in Krakow, Poland, for EUR 75 M, about SEK 720 M.
Skanska sells office building in London, UK, for about GBP 118 M, about SEK 1.3 billion.
Skanska divests its investments in the Mullberg wind farm in the Berg municipality, Sweden, for about SEK 370 M.
Skanska sells office building in Poznan, Poland, for EUR 73 M, about SEK 700 M.
Skanska Annual Report 2017194 Consolidated quarterly results
In compliance with IFRS
2017 2016
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Order bookings 33,232 34,110 46,254 38,215 39,615 46,426 53,859 30,344
Profit/lossRevenue 45,302 38,868 40,094 33,613 39,550 35,487 39,926 30,402
Cost of sales –41,215 –35,762 –37,346 –30,780 –35,772 –32,502 –34,732 –28,113
Gross income 4,087 3,106 2,748 2,833 3,778 2,985 5,194 2,289
Selling and administrative expenses –3,097 –2,091 –2,390 –2,273 –2,560 –2,157 –2,298 –2,137
Income from joint ventures and associated companies 390 129 95 1,041 1,618 220 129 159
Operating income 1,380 1,144 453 1,601 2,836 1,048 3,025 311
Interest income 23 13 35 18 18 14 9 30
Interest expense –21 –20 –34 –36 –52 –33 –34 –51
Change in market value 4 6 5 9 16 7 2 –23
Other financial items 7 3 17 16 –43 –3 36 –12
Financial items 13 2 23 7 –61 –15 13 –56
Income after financial items 1,393 1,146 476 1,608 2,775 1,033 3,038 255
Taxes –208 –108 29 –225 –457 –217 –640 –52
Profit for the period 1,185 1,038 505 1,383 2,318 816 2,398 203
Profit for the period attributable to
Equity holders 1,181 1,031 500 1,383 2,313 813 2,394 202
Non-controlling interests 4 7 5 0 5 3 4 1
Other comprehensive income
Items that will not be reclassified to profit or loss for the period
Remeasurement of defined-benefit pension plans 595 355 –1529 180 2866 –2,578 –1,190 –225
Tax related to items that will not be reclassified to profit or loss for the period –143 –78 328 –38 –574 454 254 55
452 277 –1201 142 2292 –2,124 –936 –170Items that have been or will be reclassified to profit or loss for the period
Translation differences attributable to equity holders 288 –284 –438 –165 179 728 495 –237
Translation differences attributable to non-controlling interests 4 2 3 –1 –1 5 3 1
Hedging of exchange rate risk in foreign operations –91 –5 –32 3 99 –60 1 –4
Effect of cash flow hedges 98 –54 9 85 –4 37 –56 54
Share of other comprehensive income for joint ventures and associated companies 13 15 37 18 1,467 –54 –209 –349
Tax related to items that have been or will be reclassified to profit for the period –16 7 –3 –13 1 –3 8 –10
296 –319 –424 –73 1,741 653 242 –545
Other comprehensive income after tax for the period 748 –42 –1,625 69 4,033 –1,471 –694 –715
Comprehensive income for the period 1,933 996 –1,120 1,452 6,351 –655 1,704 –512
Comprehensive income for the period attributable to
Equity holders 1,925 987 –1,128 1,453 6,347 –663 1,697 –514
Non-controlling interests 8 9 8 –1 4 8 7 2
Order backlog 188,411 194,743 202,214 200,792 196,254 191,567 177,902 154,590
Capital employed 44,111 42,589 41,594 42,773 42,605 38,672 36,734 36,846
Interest-bearing net receivables/net debt –1,126 –5,560 –4,323 2,917 1,219 –3,210 –463 2,367
Debt/equity ratio 0.0 0.2 0.2 –0.1 0.0 0.2 0.0 –0.1
Return on capital employed, % 11.1 14.8 14.9 21.9 19.2 20.4 19.8 15.9
Cash flow
Cash flow from operating activities 4,059 –568 –1,233 588 –457 376 2,102 –2,904
Cash flow from investing activities –809 726 –387 2,060 1,583 –1,617 –1,340 –219
Cash flow from financing activities –560 –107 –1,046 –1,104 –261 –237 –2,442 –1,150
Cash flow for the year 2,690 51 –2,666 1,544 865 –1,478 –1,680 –4,273
Consolidated quarterly results
Skanska Annual Report 2017 195Consolidated quarterly results
Business streams
In compliance with IFRS
2017 2016
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Order bookings
Construction 33,232 34,110 46,254 38,215 39,615 46,426 53,859 30,344
Total 33,232 34,110 46,254 38,215 39,615 46,426 53,859 30,344
Revenue
Construction 41,074 38,208 38,681 32,087 38,827 34,969 33,767 30,438
Residential Development 3,422 2,167 3,633 2,601 2,487 1,729 1,815 1,540
Commercial Property Development 4,906 1,670 1,269 1,671 1,940 1,112 6,082 577
Infrastructure Development 22 20 18 21 35 28 155 19
Central and eliminations –4,122 –3,197 –3,507 –2,767 –3,739 –2,351 –1,893 –2,172
Total 45,302 38,868 40,094 33,613 39,550 35,487 39,926 30,402
Operating income
Construction –221 918 116 392 1,264 942 898 442
Residential Development 482 205 514 307 347 171 140 88
Commercial Property Development 1,441 304 139 183 180 60 1,968 –9
Infrastructure Development 40 –25 –29 939 1,475 126 131 86
Central –327 –200 –234 –182 –431 –226 –234 –250
Eliminations –35 –58 –53 –38 1 –25 122 –46
Total 1,380 1,144 453 1,601 2,836 1,048 3,025 311
According to segment reporting
2017 2016
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Order bookings
Construction 33,232 34,110 46,254 38,215 39,615 46,426 53,859 30,344
Total 33,232 34,110 46,254 38,215 39,615 46,426 53,859 30,344
Revenue
Construction 41,074 38,208 38,681 32,087 38,827 34,969 33,767 30,438
Residential Development 3,136 2,033 4,716 3,352 4,529 2,596 3,479 2,660
Commercial Property Development 3,685 1,074 5,119 1,562 2,673 1,339 1,794 4,420
Infrastructure Development 22 20 18 21 35 28 155 19
Central and eliminations –4,298 –3,249 –3,598 –2,840 –3,827 –2,411 –1,943 –2,240
Total 43,619 38,086 44,936 34,182 42,237 36,521 37,252 35,297
Operating income
Construction –221 918 116 392 1,264 942 898 442
Residential Development 394 219 665 438 680 250 378 297
Commercial Property Development 863 594 978 279 322 202 451 1,361
Infrastructure Development 40 –25 –29 939 1,475 126 131 86
Central –328 –199 –235 –182 –431 –226 –234 –249
Eliminations –10 –41 –44 –17 –10 –28 40 32
Total 738 1,466 1,451 1,849 3,300 1,266 1,664 1,969
Consolidated quarterly results, continued
Skanska Annual Report 2017196 Annual General Meeting, Investors
Annual General Meeting
The Annual General Meeting of Skanska AB (publ) will be held
at 10:00 a.m. on April 13, 2018, at the Stockholm Waterfront
Congress Centre, Nils Ericsons Plan 4, Stockholm, Sweden.
Notification and registrationShareholders who wish to participate in the Annual General Meeting
must be listed in the register of shareholders maintained by Euroclear
Sweden AB, the Swedish central securities depository and clearing
organization, on Saturday, April 7, 2018 and must notify Skanska
by April 9, 2018, preferably before 12 noon, of their intention to
participate in the Meeting.
Shareholders whose shares have been registered in the name of a
trustee must have requested re-registration in their own name in the
register of shareholders maintained by Euroclear Sweden AB to be
entitled to participate in the Meeting. Such re-registration, which may
be temporary, should be requested well in advance of, April 7, 2018
from the bank or brokerage house holding the shares in trust.
Notification may be made in writing to:Skanska AB, Årsstämman 2018
c/o Euroclear Sweden, Box 191, SE-101 23 Stockholm, Sweden
Telephone: +46 8 402 92 81
Website: www.skanska.com/group
The notification must always state the shareholder’s name, personal
identification or corporate identity number, address and telephone
number. For shareholders represented by proxy, a power of attorney
should be sent to the company before the Meeting. Shareholders who
have duly notified the company of their participation will receive an
admittance card, which should be brought and shown at the entrance
to the Meeting venue.
DividendThe Board of Directors propose a dividend of SEK 8,25 (8,25) per share
for the 2017 financial year. The proposal is equivalent to a regular
dividend payout totalling SEK 3,372 M (3,380). The Board proposes
April 17 as the record date for the dividend. Provided that the Meeting
approves this proposal, the dividend is expected to be distributed by
Euroclear AB on April 20, 2018.
The total dividend amount may change by the record date, depending
on repurchases of shares and transfers of shares to participants in the
company’s long-term employee ownership programs.
Investors
CalendarThe Skanska Group’s interim reports will be published
on the following dates:
Three Month ReportMay 9, 2018
Six Month ReportJuly 20, 2018
Nine Month ReportNovember 8, 2018
Year-end ReportFebruary 8, 2019
Distribution and other informationThe interim reports and the Annual Report can
be read or downloaded from Skanska’s website
www.skanska.com/investors.
Those wishing to order the printed Annual Report can
easily use the order form found on the above website,
or contact Skanska AB, Investor Relations.
The website also contains an archive
of interim reports and Annual Reports,
as well as Annual Reviews in USD.
www.facebook.com/skanska
www.linkedin.com/company/skanska
www.twitter.com/skanskagroup
If you have questions, please contact:Skanska AB, Investor Relations
SE-112 74 Stockholm, Sweden
Telephone: +46 10 448 00 00
E-mail: [email protected]
Skanska Annual Report 2017 197Addresses
Larsson Offsettryck
Printed matter
341 298
Annual report production team:Skanska AB in collaboration with Addira.Text: Skanska ABTranslation: NovotermPrint: Larsson Offsettryck LinköpingPhotos: Skanska
More information about Skanska:www.skanska.com
Addresses
Skanska AB (publ)SE - 112 74 StockholmSwedenStreet address: Warfvinges väg 25Tel: +46 10-448 00 00www.skanska.com
Skanska SwedenSE - 112 74 StockholmSwedenTel: +46 10-448 00 00 Customer service: +46 20-30 30 40www.skanska.se
Skanska NorwayPostboks 1175 SentrumNO-0187 OsloStreet address:Lakkegata 53Norway+47 40 00 64 00 www.skanska.no
Skanska FinlandPL 114Nauvontie 1800280 HelsinkiFinland+358 20 719 211 www.skanska.fi
Skanska Poland ul. Pruszkowska 17PL-02 119 WarszawaPolandTel: +48 22 561 30 00www.skanska.pl
Skanska Czech Republic and SlovakiaKřižíkova 682/34a186 00 Prague 8, KarlínCzech RepublicPhone: +420 267 095 111www.skanska.cz www.skanska.sk
Skanska UK Maple Cross HouseDenham WayMaple CrossRickmansworth, HertfordshireWD3 9SWUnited Kingdom+44 (0) 1923 423100 www.skanska.co.uk
Skanska USA Empire State Building 350 Fifth Avenue, 32nd floorNew YorkNew York 10118USATel: +1 917 438 4500www.usa.skanska.com
Skanska USA Building389 Interpace Parkway, 5th floorParsippany, NJ 07054USATel: +1 973 753 3500www.usa.skanska.com
Skanska USA Civil75–20 Astoria BoulevardSuite 200Queens, New York, N.Y. 11370USATel: +1 718 340 07 77www.usa.skanska.com
Skanska Commercial Property Development NordicSE - 112 74 StockholmSwedenTel: +46 10-448 00 00 www.skanska.com/property
Skanska Commercial Property Development EuropeSE - 112 74 StockholmSwedenTel: +46 10-448 00 00 www.skanska.com/property
Skanska Commercial Property Development USA Empire State Building 350 Fifth Avenue, 32nd floorNew YorkNew York 10118USATel: +1 917 438 4514www.usa.skanska.com
Skanska Infrastructure DevelopmentSE - 112 74 StockholmSwedenTel: +46 10-448 00 00 www.skanska.com/id
Skanska Financial ServicesSE - 112 74 StockholmSwedenTel: +46 10-448 00 00 www.skanska.com
For other addresses:www.skanska.com
Skanska AB
www.skanska.com/group
Warfvinges väg 25
SE–112 74 Stockholm
Sweden
Tel: +46 10-448 00 00